Wednesday, March 31, 2004
Double digit growth at last in India
The Financial Times is reporting that the returns from the bumper monsoon are in -- India's economy grew at 10.4% in the third quarter, finally overtaking China as the fastest growing large economy in the world. Like the BJP needed anymore good news!! However, the good news comes with plenty of caveats, especially since the agriculture sector seems to be the main driver.
Much of the 10.4 per cent growth in third-quarter gross domestic product, which has coincided with national elections that will be held this month, continues to be driven by the effects of the bumper monsoon rains last year. Growth in agriculture, which accounts for almost a quarter of the Indian economy, was almost 17 per cent in the quarter ending on 1 January. India’s new financial year begins on Thursday.
Overall GDP growth, which is expected to reach 8 per cent for the year, was also boosted by a strong services sector, which accounts for more than half the economy. However, economists said that India was unlikely to sustain 10.4 per cent GDP growth without more vigorous reforms, particularly in rural infrastructure. "We are still feeling the after-effects of a strong monsoon," said Shankar Acharya, an economics commentator. "These double-digit numbers are more of a one-off windfall which do not suggest equally high growth next year or the one after."
The strong GDP numbers further bolstered the Indian rupee, which on Wednesday touched a four-year high of 43.88 against the US dollar. It has appreciated by almost 6 per cent against the dollar in the last 12 months.
Much of the 10.4 per cent growth in third-quarter gross domestic product, which has coincided with national elections that will be held this month, continues to be driven by the effects of the bumper monsoon rains last year. Growth in agriculture, which accounts for almost a quarter of the Indian economy, was almost 17 per cent in the quarter ending on 1 January. India’s new financial year begins on Thursday.
Overall GDP growth, which is expected to reach 8 per cent for the year, was also boosted by a strong services sector, which accounts for more than half the economy. However, economists said that India was unlikely to sustain 10.4 per cent GDP growth without more vigorous reforms, particularly in rural infrastructure. "We are still feeling the after-effects of a strong monsoon," said Shankar Acharya, an economics commentator. "These double-digit numbers are more of a one-off windfall which do not suggest equally high growth next year or the one after."
The strong GDP numbers further bolstered the Indian rupee, which on Wednesday touched a four-year high of 43.88 against the US dollar. It has appreciated by almost 6 per cent against the dollar in the last 12 months.
