New Delhi, Nov. 30: The GDP growth rate crackled at 9.1 per cent in the first half of 2006-07, on the back of a scorching pace set by the manufacturing and service sectors.
The growth rate in the gross domestic product (GDP) was 9.2 per cent in the second quarter of 2006-07 — July to September 2006 — and 8.9 per cent in the first quarter, though the farm sector reported a tardy progress.
The figures sent finance minister P. Chidambaram into raptures. “This is a moment to savour,” he said.
Chidambaram said he was doubly happy at the 9.1 per cent growth rate being the highest for the first half of any fiscal since reforms started in 1991-92. “I hope that the current year turns out to be one of the best years of economic growth,” he told newspersons.
All eyes will now be on the third quarter. A year ago, there was a blip in the third quarter that proved to be a drag on the growth rate for the whole of 2005-06, in spite of strong first, second and fourth quarters.
Finance ministry officials said fears of inflation, stoked by growth, could push up interest rates this time. Chidambaram, too, said the government was comfortable with the rate of inflation below 5 per cent and even more with a rate of less than 4 per cent. He, however, added that it was too premature to say that the economy was overheated.
The government cut prices of petrol and kerosene yesterday, to control inflation and win popular support before the upcoming state elections.
However, most bankers expect the Reserve Bank to raise its benchmark overnight inter-bank lending rate by a quarter to half a per cent, to tame inflation.
Manufacturing grew 11.9 per cent in the second quarter (July-September 2006) compared with 11.3 per cent in the previous quarter; services 10.9 per cent compared with 10.6 per cent; and trade, hotels, transport and communication 13.9 per cent compared with 13.2 per cent.
The only drag was agriculture, which reported a lower growth rate of 1.7 per cent compared with 3.4 per cent in the first quarter. Clearly, the Prime Minister has a problem on his hand, since more than two-thirds of India’s population of a billion plus live in villages.