India's Economic Growth Accelerates

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The Indian economy recorded its biggest growth in 18 months in the three months to September led by a stronger manufacturing sector and stimulative measures taken by the government, signaling a possible interest rate hike in future.

The economy expanded more than expected in the September quarter, by 7.9% from a year ago, larger than the 6.1% growth reported in the previous quarter, a report released by the Central Statistical Organization showed Monday. Consensus forecast was for a 6.3% increase.

Westpac economists said the growth acceleration is the first since 2007 and clearly shows a waning impact from global recession. Montek Singh Ahluwalia, Deputy Chairman of Planning Commission, said today that there could be an upward revision in the 6.5% GDP growth projection for this fiscal year ending March 2010.

The manufacturing sector showed a robust performance with 9.2% growth, following an increase of 3.4% in the prior quarter. The mining sector rose 9.5%, up from 7.9% in the previous quarter. Trade, transport and communication services climbed 8.5%, faster than the annual 8.1% growth in the previous three months. However, construction grew at a slower pace of 6.5% compared to 7.1% in the previous quarter. Agriculture, forestry and fishing moved up only 0.9% versus 2.4% in the previous quarter.

During April to September, the economy expanded 7% compared to 7.8% recorded during same period of last year.

In a report released on November 19, the Paris-based Organization for Economic Cooperation and Development said the ongoing recovery in India will be only modestly hampered by poor monsoon rainfall in the near term. The think-tank estimated economic growth to reach over 7% in 2010 and 7.6% in 2011. Inflation has been rising since mid-2009 and is expected to remain high over the projection period.

In its latest monetary policy review, the Reserve Bank of India policy makers led by governor Duvvuri Subbarao had maintained its key interest rates for a second rate-setting session. However, the bank hiked the statutory liquidity ratio to 25% from 24% and started exiting liquidity support measures.

The central bank maintained its economic growth forecast for the year ending March 31, 2010, at 6% with an upward bias, while hiked the inflation outlook, also with an upward bias, to 6.5% from 5%. The bank said the Indian economy, which slowed down in the second half of 2008-09 due to the global financial crisis, has begun to stabilize despite falling exports and poor monsoon.

During the same period, neighbouring China also reported a strong performance. The GDP rose 8.9% annually in the third quarter, faster than the 7.9% increase in the previous quarter.

The Indian economy recorded its biggest growth in 18 months in the three months to September led by a stronger manufacturing sector and stimulative measures taken by the government, signaling a possible interest rate hike in future. (Market News Provided by RTTNews)