8.8% GDP growth in Q1 surpasses all expectations

The sterling performance of the economy in the first quarter of this fiscal, with the GDP growth clocking 8.8 per cent as compared to 6.0 per cent in the first quarter of last year, has surpassed the expectations. The current growth rate deemed to be the fastest in more than two years, shows that our economy is firmly on the road to recovery despite the partial rollback of stimulus package. The current performance has rekindled hopes that the Indian economy would grow at 8.5 per cent with an upward bias in the current fiscal as predicted by the Finance Minister, Mr Ashok Kajaria, President, PHD Chamber said in a press release here today. 

What is particularly noteworthy is that our economy is firing at all cylinders, with agriculture, industry and services showing an improvement in performance. In fact, growth is being spurred by robust industrial performance, a good monsoon as compared to last year and impressive growth of trade, hotels, transport and communications sector. Such a trend, if continued, could help spur the economy and bring back the growth trajectory experienced in the post 2004 period, the Chamber press release said.

Having said so, there is no cause for complacency. The fundamental imbalances in the world economy have not yet disappeared despite an upturn in growth rates in the economies of US and UK. Besides, our economy has grown on the low base of last year, our agriculture performance is still moderate and industry is still not out of the woods. We have some way to go before manufacturing resurgence sets in. At the same time, growth of private consumption expenditure, which is an indicator of demand, is below that of last year, the press release added.

Under the circumstances, it is important that steps be taken so that growth trigger unleashed in the economy during the first quarter of the current fiscal is maintained.  For this, there is need to initiate reforms in agriculture by addressing supply side bottlenecks especially in pulses, vegetables, dairy products.

The proposal for allowing FDI in retail should be given serious consideration.  Besides, a focus on infrastructure and power sector reforms, disinvestment in non-strategic PSUs, better targeting of subsidies, among others are warranted.

 RBI should desist from raising interest rates to quell inflation as this could adversely impact our nascent industrial recovery, the Chamber release said.

Media Division

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