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Generous monsoon powers 8% growth in Q2
By Sources
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Thursday, 01 December 2005, 20:30 IST
NEW DELHI: India's economy expanded in the country's financial second quarter (July-September), crossing 8 percent as monsoon rains increased harvests for the nation's 600 million farmers. In comparison the GDP growth rate was 6.7 percent during Q2 2004.
Gross domestic product expanded 8 percent in the three months ending September 30 from a year earlier, the Central Statistical Organization said in New Delhi. The economy grew 8.1 percent in the first quarter.
An increase in monsoon rains, which irrigate about two thirds of the nation's cropland, promises to spur a rebound in agriculture after last year's scarcity caused a drop in output. Growth may accelerate this quarter as oil production recovers following the destruction of a platform in a storm and with borrowing costs at near-record lows.
"The increase in farm production is making the difference to growth," said Pyarelal Raghavan, an economist at Federation of Indian Chambers of Commerce and Industry in New Delhi. "Also, incomes are rising and interest rates are low."
India's central bank on Oct. 25 raised its growth forecast for the financial year ending March 31 to as much as 7.5 percent from 7 percent. The economy grew 6.9 percent last year.
"The forecast is achievable," said R.K. Gupta, a fund manager at Credit Capital Asset Management in New Delhi. "Corporate earnings are rising and more companies are investing to expand capacity."
Agriculture gained after a return to normal rains in the summer monsoon boosted production. Farm output accounts for 22 percent of the economy. Last year output was stagnant after the second-lowest monsoon rainfall levels in at least 17 years.
Growth slowed from 8.1 percent in the first quarter as oil output fell following the destruction of an oil platform and as flooding in western India hurt auto and cement sales.
Industrial production growth slowed to 7.2 percent in the second quarter from 10.4 percent in the first as rains in July and August flooded streets, shops and factories in the states of Maharashtra and Gujarat, killing 932 people.
"Growth would've been faster had oil production not been disrupted and rains not paralyzed industry in the western states," said Saumitra Chaudhuri, a policy adviser to Prime Minister Manmohan Singh. "The economy is on a sound footing."
Faster growth may enable India to overtake South Korea's economy, which was estimated at $680 billion at the end of 2004 by the International Monetary Fund.
The IMF is forecasting 7.1 percent growth for India this year and 3.8 percent for South Korea.
A 26 percent surge in exports will also boost economic growth this year, Trade Minister Kamal Nath said on November 28.
India's economic growth has averaged 6.3 percent in the past decade, the fastest rate since independence from Britain in 1947, helping double the country's per capita income to 20,862 rupees in the same period, according to government figures.