international Herald Tribune
India's economy grows 8.9 percent in April-June quarter, beating forecasts The Associated Press
Published: September 29, 2006 NEW DELHI India's economy grew a faster-than-expected 8.9 percent in the April-June quarter from a year ago, fueled by exports and strong domestic demand, the government said Friday.
That's an uptick from the previous quarter, when the economy grew 8.5 percent. Most analysts had projected the growth rate would remain the same in the April-June period, the first quarter of the current fiscal year.
The services sector, which accounts for over half of gross domestic product, grew 13.2 percent in the quarter, while manufactured output rose 11.3 percent, driven mostly by a surge in exports.
Agriculture grew 3.4 percent, unchanged from the growth it recorded in the same quarter last year.
The first quarter numbers prompted analysts to review their forecasts for the full fiscal year ending in March 2007, even though many expect the pace of expansion to moderate in the coming quarters.
"Growth is likely to moderate slightly over the remainder of 2006-07 owing to higher local interest rates and moderation in external demand," said Rajeev Malik, an economist with JP Morgan & Co. based in Singapore.
"Still, the stronger-than-expected GDP for April-June will likely prompt us to revise up our full-year growth forecast to closer to 8 percent from 7.5 percent," he said.
If India can muster 8 percent growth this year, that would be the fourth straight year it has reached that benchmark, making it one of Asia's fastest-growing economies after China, which is surging ahead at more than 10 percent a year.
New Delhi-based credit rating agency Crisil Ltd. said it was also looking to revise its forecasts upward.
The monsoon rains, which are crucial to a good harvest in this country with poor irrigation facilities, have been good and that is likely to sustain the growth momentum through the quarter, said Sunil Sinha, a senior economist at Crisil.
The economy's brisk expansion is also likely to encourage the central bank to further increase interest rates to rein in inflation without risking growth. The Reserve Bank of India is scheduled to unveil its biannual credit policy on Oct. 31.
Although rising middle class incomes have helped in keeping domestic demand robust, these have also fueled inflation, which has already been on the rise because of a surge in global oil prices. India imports three-fourth of the crude oil it processes.
Earlier this year, the central bank raised short term rates twice in a bid to keep inflation under control.
Crisil's Sinha said the central bank likely remains concerned over the volatile oil prices and that the faster-than-expected growth in the April-June period gives it "enough comfort" to consider increasing interest rates.
"The RBI doesn't appear to be saying the rate hike cycle has come to an end," Sinha said.
NEW DELHI India's economy grew a faster-than-expected 8.9 percent in the April-June quarter from a year ago, fueled by exports and strong domestic demand, the government said Friday.
That's an uptick from the previous quarter, when the economy grew 8.5 percent. Most analysts had projected the growth rate would remain the same in the April-June period, the first quarter of the current fiscal year.
The services sector, which accounts for over half of gross domestic product, grew 13.2 percent in the quarter, while manufactured output rose 11.3 percent, driven mostly by a surge in exports.
Agriculture grew 3.4 percent, unchanged from the growth it recorded in the same quarter last year.
The first quarter numbers prompted analysts to review their forecasts for the full fiscal year ending in March 2007, even though many expect the pace of expansion to moderate in the coming quarters.
"Growth is likely to moderate slightly over the remainder of 2006-07 owing to higher local interest rates and moderation in external demand," said Rajeev Malik, an economist with JP Morgan & Co. based in Singapore.
"Still, the stronger-than-expected GDP for April-June will likely prompt us to revise up our full-year growth forecast to closer to 8 percent from 7.5 percent," he said.
If India can muster 8 percent growth this year, that would be the fourth straight year it has reached that benchmark, making it one of Asia's fastest-growing economies after China, which is surging ahead at more than 10 percent a year.
New Delhi-based credit rating agency Crisil Ltd. said it was also looking to revise its forecasts upward.
The monsoon rains, which are crucial to a good harvest in this country with poor irrigation facilities, have been good and that is likely to sustain the growth momentum through the quarter, said Sunil Sinha, a senior economist at Crisil.
The economy's brisk expansion is also likely to encourage the central bank to further increase interest rates to rein in inflation without risking growth. The Reserve Bank of India is scheduled to unveil its biannual credit policy on Oct. 31.
Although rising middle class incomes have helped in keeping domestic demand robust, these have also fueled inflation, which has already been on the rise because of a surge in global oil prices. India imports three-fourth of the crude oil it processes.
Earlier this year, the central bank raised short term rates twice in a bid to keep inflation under control.
Crisil's Sinha said the central bank likely remains concerned over the volatile oil prices and that the faster-than-expected growth in the April-June period gives it "enough comfort" to consider increasing interest rates.
"The RBI doesn't appear to be saying the rate hike cycle has come to an end," Sinha said.