8.6% surge in Q4 boosts '09-10 GDP growth to 7.4%

NEW DELHI: Talk of a resounding recovery. The Indian economy roared past estimates to post a whopping growth rate of 8.6% in the January-March quarter of 2010. The quarter's strong showing also helped India end the fiscal year with 7.4% growth, beating the earlier estimate of 7.2%. Manufacturing led the way, with a whopping 16.3% growth in the quarter and 10.8% overall, while even agriculture, which was expected to decline, ended with marginal growth of 0.2% year-on-year after growing 0.7% in Q4.

The GDP growth rate had slowed to 6.7% in 2008-09 following the global economic crisis, after topping 9% in the previous three years. On Monday, finance minister Pranab Mukherjee reiterated his confidence that the economy would grow at 8.5%-plus in 2010-11.

Finance secretary Ashok Chawla also pegged economic growth at 8.5% in 2010-11. "The growth numbers are pleasant but not really surprising, because we were expecting them to be robust which they turned out to be. This clearly indicates the momentum which is in the economy and the expectations that the 8.5% estimation for 2010-11 is going to be a clear possibility," he said.

The first quarter growth in the gross domestic product (GDP) is better than expected. In February, the Central Statistical Organisation (CSO) had estimated that the Indian economy would grow at 7.2% in 2009-10, with growth of 7.7% in the fourth quarter. But the unexpectedly strong performance in the fourth quarter helped boost the final figure to 7.4%.

The fourth-quarter showing is particularly commendable in the light of a sudden dip in the third quarter to 6.5% from 8.6% in the second quarter due to the impact of a drought-like situation in the country.

China is the only large economy with a higher growth rate at 11.9% in the January-March quarter. The rest of the world is witnessing a fragile recovery, which is now under threat due to the brewing Euro-zone crisis. The sixteen developed countries in the Euro-zone expanded by just 0.2% in the quarter. At the same time, the Organisation for Economic Cooperation and Development (OECD) — a grouping of mostly developed countries including Europe that account for over 60% of the global economy — grew at only 0.7% in the quarter, against 0.9% in the previous quarter. US and Japan grew at 0.8% and 1.2% respectively.

In the backdrop of the slow recovery in the global economy, the strong growth is a testimony to its vibrant domestic markets. The main driver is the manufacturing sector, which grew at 16.3% in the fourth quarter, against 0.6%. The 7.4% growth in 2009-10 also showed that stimulus provided by government have yielded results. The manufacturing sector, which bore the brunt of slowdown and had grown 3.8% in 2008-09, bounced back and posted 10.8% growth in 2009-10.