GDP Growth and India's Economy

Consider these points about contributions of various sectors in India's GDP growth:

DATA ON the macro economy for the first quarter of this fiscal year are encouraging. At the same time it will be wrong to ignore the cautionary signals.

First, the CSO data for the first quarter. A healthy 8.1 per cent growth in the GDP in April-June on top of a 7.6 per cent growth during the same period last year seems to suggest that the economy is finally moving to a higher growth trajectory.

Sustainability factor

The key issue is really one of sustaining the high growth seen in the first quarter. That is going to be challenging if the past is any guide. During the first three years of the Tenth Plan the average GDP growth has been 6.5 per cent. The original plan document had postulated an average growth of 8 per cent over the five years. Clearly there is considerable catching up to do if the economy is to achieve a rate somewhere near that level.

If we look at the break up of the growth data during the first quarter Manufacturing has been the star performer this year with an 11.3 per cent growth and helped industry move up by 9.7 per cent on a year on year basis. If sustained, the manufacturing boom will help correct the "over reliance'' on the services sector.

Gems in services
A whole range of sub-sectors within services have fared very well. These include trade, hotels, transport and communications, insurance and real estate. Clearly they add to the GDP growth but one is less sure as to whether some or all these service sectors by themselves drive the economy forward or they derive their growth from a buoyant economy. The opening up of the insurance sector, for instance, has widened the market. India's recent success in telecommunications, especially in mobile telephony, is well recognised.

Laggard farm sector

Agriculture continues to drag down the GDP growth. During the first three months, it grew by just 2 per cent against 3.8 per cent last year. Mining has been another laggard with a growth rate of just 3.2 per cent, less than half of last year.

Source: The Hindu