Tags: AS | India | Economy

India's Economy Grew 8.8 Percent in June Quarter

Tuesday, 31 Aug 2010 08:00 AM

India's economy grew 8.8 percent in the June quarter, its fastest pace in over two years, as good farm and manufacturing output lifted growth back to its pre-crisis growth trajectory.

Economic doldrums this time last year helped bolster growth rates, which some economists say will begin to ease as that effect wears off and central bank rate hikes begin to felt in Asia's third-largest economy.

India's growth averaged nearly 9 percent before the Great Recession, which dragged growth this time last year to 6 percent — the last quarter before India's economic rebound began.

Tuesday's numbers are unlikely to jolt the central bank from its path of monetary tightening. A CNBC-TV18 poll had forecast 8.9 percent growth for the June quarter.

The Reserve Bank of India has raised key interest rates four times this year in a bid to tame high inflation, but the effect of those hikes has yet to filter out to the real economy, economists say.

"In terms of sustainability, the growth number will settle around 8.5 percent. There will be a deceleration," said Enam Securities economist Sachchidanand Shukla. "You are already seeing a moderation in industrial production numbers."

Despite the glittering headline numbers — quarterly manufacturing output surged 12.2 percent, record auto sales in July, telephone connections up 36.7 percent in the quarter — economists say consumer demand remains narrow and the shadow of global economic uncertainty is constraining capital spending and could disrupt industrial production and credit growth.

"Global uncertainty has taken a toll," Shukla said. "The most important factor is not interest rates or availability of funds. It's got to do with confidence. Every two months, you're seeing a spate of bad news." Industrialists with big investment plans would "rather wait and watch" in that environment, he said.

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India's economy grew 8.8 percent in the June quarter, its fastest pace in over two years, as good farm and manufacturing output lifted growth back to its pre-crisis growth trajectory.Economic doldrums this time last year helped bolster growth rates, which some economists...
AS,India,Economy
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2010-00-31
 

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