New Delhi, Jan. 31: India’s gross domestic product grew 9.6 per cent in 2006-07 — second only to 1988-89 in growth since Independence — on the back of rising salaries and a strong performance by manufacturing and services.

An earlier estimate had put the growth rate at 9.4 per cent. Finance minister P. Chidambaram told journalists that he expected the economy to expand by about 9 per cent in the current fiscal, too.

“Despite global turbulence and heightened uncertainties our economy has been growing at the rate of 9.4 per cent and 9.6 per cent. We are confident that if we keep firm hands on the wheel, the Indian economy will sail through turbulent waters (this year too),” Chidambaram said.

A downturn in the US economy on the back of the sub-prime crisis is expected to hit global demand. However, since India depends far less on exports and more on trade within its borders, the impact of the downturn should be far less.

But oil prices, which have risen to over $93 per barrel and as yet not been passed on to consumers, could raise inflationary pressures and force a slowdown in the Indian economy. In the current financial year, the economy grew 9.3 per cent in the first quarter and 8.9 per cent in the second.

The strong show was despite the rupee appreciating 12.3 per cent against the dollar, affecting software, textile and jewellery.

“I will still maintain that in fiscal 2007-08, growth will be close to 9 per cent,” Chidamabaram said.

He said the government would take quick decisions to meet the evolving global economic situation.

According to government figures, manufacturing grew 12 per cent, transportation and communication, 16.6 per cent, and construction, 12 per cent. Farming, which provides employment to about a half of the country’s population, rose only 3.8 per cent in 2006-07, against 6.1 per cent the year before.

Trade, hotels and restaurants grew 8.5 per cent; transport, storage and communication, 16.6 per cent; financing, insurance, real estate and business services, 13.9 per cent and community, social and personal services, 6.9 per cent.