GDP grows 8.8% in Q1 FY11

Manufacturing sectors impressive performance spurs good show

The current bout of surge in the growth rate of the economy, which has been hit by the ongoing global slowdown since late 2008, has been primarily spurred by impressive performance in the key manufacturing and services sector.

The crucial manufacturing sector, which plays the vital role in triggering overall consumer demand, recorded an impressive growth rate of 12.4 per cent compared to mere 3.8 per cent in the corresponding quarter of the previous fiscal—2008-09.

What is significant is that the agricultural sector, which also plays a key role in boosting overall economic growth grew by 2.8 per cent in the first quarter this fiscal as against 1.9 per cent in the corresponding period of 2008-09. Experts say this robust performance in the first quarter despite low base year effect of previous fiscal underscores the strong recovery in the economy, which till recently was reeling under the ripple effect of global slowdown.

Encouraged by the first quarter growth figure Finance Minister Pranab Mukherjee expressed confidence that the economy would grow by not less than 8.50-8.75 per cent this fiscal. “The 12.4 per cent growth rate recorded by the manufacturing sector is encouraging. I think this is the highest growth rate in the last 11 quarters. This means there has been more employment generation and job creation,” he told newspersons here. “But we will have to reach the 4 per cent growth in agriculture to have sustainable growth,” Mukherjee said. 

On expected lines

Impressed with robust growth rate of the economy in the first quarter of 2010-11 the Planning Commission Deputy Chairman Montek Singh Ahluwalia said “this growth is on expected lines and that the economy will grow by more than 8.5 per cent as projected for the current  fiscal.”

He projected that though the growth rate of the manufacturing sector was likely to be low during the rest of the year, the agriculture sector would register good performance.
Analysis of data shows that though the sectors like manufacturing showed impressive performance other segments did not perform that well.

For instance, financial, insurance and real estate services grew by 8 per cent compared to a high rate of 11.8 per cent in the first quarter of previous fiscal.

However, trade, hotels and communication services expanded by 12.2 per cent compared to 5.5 per cent during April-June 2009.

CII Director General Chandrajit Banerjee said “the strong GDP growth seen in the first quarter of 2010-11 is very encouraging and maintains India’s position as the second fastest growing economy in the world after China.”

CII expressed confidence that the economy would grow at 8.5 per cent in 2010-11.
Echoing similar views FICCI President Ranjan Bhari Mittal said, “Given this trend in GDP growth, we expect to close the year with an overall performance of close to 9 per cent.”