India Economic Update, June 2010
India's economic performance in FY2009/10 shows that the recovery from the slowdown during the global financial crisis is well underway. India's Gross domestic Product (GDP) growth in FY2009/10 has beaten expectations by reaching 7.4 percent compared with 6.7 percent in the previous year. In particular, agricultural sector growth was better than feared with a slightly positive growth rate despite the worst monsoon shortfall in three decades. Strong growth in the fourth quarter pushed annual GDP growth to 7.4 percent in 2009-10. Fourth quarter growth reached 8.6 percent (y-o-y), the highest quarterly growth rate since the end of FY2007/08. The industrial sector's robust recovery beat expectations. Growth in the last quarter of fiscal year FY2009/10 was an unexpectedly high 13.3 percent resulting in over 12 percent growth in the second half of year, nearly double the 6 percent growth witnessed in the first half. Higher inflation mars the bright picture, but there are clear indications of moderation. Inflation as measured by the wholesale price index (WPI) averaged 10 percent during February-May 2010. India's recovery after the slowdown seems well underway. Growth is projected to climb to 8-9 percent in the next two years. These growth rates are achievable without a renewed build-up of inflationary pressure as long as agricultural growth returns to trend, infrastructure constraints are alleviated, and international prices remain stable. Over the next year, sources of growth will shift from fiscal stimulus to manufacturing and, possibly a recovering agriculture.
Summary: | India's economic performance in
FY2009/10 shows that the recovery from the slowdown during
the global financial crisis is well underway. India's
Gross domestic Product (GDP) growth in FY2009/10 has beaten
expectations by reaching 7.4 percent compared with 6.7
percent in the previous year. In particular, agricultural
sector growth was better than feared with a slightly
positive growth rate despite the worst monsoon shortfall in
three decades. Strong growth in the fourth quarter pushed
annual GDP growth to 7.4 percent in 2009-10. Fourth quarter
growth reached 8.6 percent (y-o-y), the highest quarterly
growth rate since the end of FY2007/08. The industrial
sector's robust recovery beat expectations. Growth in
the last quarter of fiscal year FY2009/10 was an
unexpectedly high 13.3 percent resulting in over 12 percent
growth in the second half of year, nearly double the 6
percent growth witnessed in the first half. Higher inflation
mars the bright picture, but there are clear indications of
moderation. Inflation as measured by the wholesale price
index (WPI) averaged 10 percent during February-May 2010.
India's recovery after the slowdown seems well
underway. Growth is projected to climb to 8-9 percent in the
next two years. These growth rates are achievable without a
renewed build-up of inflationary pressure as long as
agricultural growth returns to trend, infrastructure
constraints are alleviated, and international prices remain
stable. Over the next year, sources of growth will shift
from fiscal stimulus to manufacturing and, possibly a
recovering agriculture. |
---|