With a 9.4 per cent growth forecast in 2010-11, the Indian economy is poised to return to its pre-crisis pace of expansion.
Indian economy is poised to grow 9.4 per cent in fiscal 2010-11 as against the 7.4 per cent growth of 2009-10. All the three broad sectors - agriculture, industry and services, are expected to fare well.
The foodgrain output is expected to witness 10 per cent growth to 114 million tonne in the 2010 Kharif season, against a 12 per cent decline in the same season a year ago, while Rabi season will see 2 per cent spurt to 116.6 mn tonne compared to a 1.7 per cent drop last season. The push comes from the normal and wide spread 2010 south-west monsoon (102 per cent of long term average), which led to area of sowing expanding seven per cent during the Kharif season. However, monsoon was below normal in eastern UP, West Bengal, Bihar, Jharkhand, Assam, Madhya Pradesh, Chhattisgarh and Meghalaya. Thus, the overall food grain output will grow 5.3 per cent to 230 mn tonne, which is lower than 234.5 mn tonne produced in 2008-09. Oil seeds production is expected to rise by 11.1 per cent to 18.1 million tonne; sugarcane would notch a growth of 15.6 per cent to 321 million tonne and cotton will grow 12.4 per cent to 26.9 million tonne.
The industrial sector (including construction) is likely to grow 9.4 per cent in 2010-11, better than the 9.2 per cent growth of 2009-10. In the services sector, it said that the sector is projected to expand by 10.7 per cent this year as compared to
8.6 per cent in FY 10. The trade and transport segment would lead this growth.
With an impressive growth in the commodities sector, trade activities are buoyant and would grow 10.8 per cent in 2010-11, as against a 7.3 per cent rise estimated in 2009-10 and a 6.3 per cent growth achieved in 2008-09.
Rating agency Crisil has revised its forecast growth to 8.6 per cent for 2010-11, in view of the economy's strong performance in the first two quarters of this fiscal. The agency had earlier predicted GDP growth at 8.2 per cent in its post-monsoon forecast. Agriculture, industry and services are likely to grow at 5 per cent, 8.6 per cent and 9.4 per cent in 2010-11 respectively. The robust farm production this year was aiding recovery and also reigning in inflation.
During the H1 of 2010-11, the GDP grew 8.9 per cent, resoundingly validating India's growth story. India has effectively endured a global crisis and the worst drought in 30 years. It continues to be one of the fastest growing economies. The nominal GDP growth was 14-15 per cent and the current gross domestic saving is at 34 per cent of GDP representing a huge opportunity for many businesses.
The Indian government too has raised its economic growth forecast for 2010-11 to 8.75 per cent from 8.5 per cent, as Asia's third-largest economy is poised to return to its pre-crisis pace of expansion. In a review presented to the Parliament, the government even expects the growth to top 9 per cent - the average rate in the four years until March 2008, before the economic crisis unfolded, at a time when European economies are still struggling to find an exit from a prolonged slowdown.
Faster growth is expected to continue in the third and final quarters of the current year as agriculture recovers sharply from last year's drought and inflation starts to fall. Both in turn will boost demand in rural and urban areas and improve investor confidence.
Despite some recent easing, high inflation fueled by soaring food prices threatens to stunt the economic recovery. The wholesale price index-based inflation rate--the main gauge of prices--eased marginally in October to 8.58 per cent from a year earlier, compared with 8.62 per cent in the preceding month. The finance ministry aims to drag it down to about 6 per cent by March. It hopes prices to cool off, thanks to the recent heavy rains which are expected to boost farm output this year.
In case of public finance, the fiscal deficit is expected to remain within the budgeted aim of 5.5 per cent of gross domestic product this year despite the additional spending on improving rural infrastructure and education facilities. Advance tax payments by India's top 100 corporate taxpayers were up 18.7 per cent in December from a year ago, indicating better corporate performance in the third quarter. This is higher than the required 14 per cent for meeting budget targets and provides some comfort to the government that has seen its spending rise because of new schemes and higher subsidy outgo. Top 100 companies have paid Rs 27,531 cr in advance tax in the month, compared with Rs 23,190 crore in December last year. The government has sought parliament's approval to spend about Rs 74,400 crore (US$16.6 billion) more than its budgeted amount of Rs 11 trillion in the year through March 2011.
India enjoys a special demographic advantage. With over 200 million households, India is not only a huge consumer market but also an attractive investment destination. However, the journey is unlikely to be smooth - a number of roadblocks will be encountered along the way. The rising global commodity prices are adding further fuel to the fire. Interest rates are headed up.
(Source: FIRST Infocentre)
