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Growth stays below 5%

New Delhi, Nov. 29: An expansion in farm, manufacturing, construction and services sectors helped the economy to recover slightly in the September quarter, but growth still hovered close to decade lows, tempering hopes of a sustained rebound ahead of elections next year.

September’s figure of 4.8 per cent was the fourth successive quarter of economic growth below 5 per cent and remained far below the 8 per cent the government says is needed to reduce poverty and provide jobs for its burgeoning young population.

However, the government remains confident of a growth rebound, observing “green shoots” of revival in the growth numbers.

Exuding confidence that the growth rate will climb to 6 per cent next year, finance minister P. Chidambaram today said the government would in the next six months liberalise capital markets and the financial sector.

North Block economists said, “The winter crops should be better strong farm showing during this period will again boost rural spending and this should reflect in better industrial performance in the second half of this year,” officials said.

“The full impact of the improvement in agriculture will be felt in the third and fourth quarters,” said C. Rangarajan, chairman of the PM’s advisory panel.

Economists were also cautiously optimistic that the new numbers meant the worst was over for Asia’s third-largest economy, but said high inflation and political uncertainty meant it was too early to predict a quick recovery.

The farm sector grew 4.6 per cent during the second quarter compared with 1.7 per cent in the year-ago period; electricity, gas and waterworks grew 7.7 per cent from 3.2 per cent a year ago.

Manufacturing grew 1 per cent against just 0.1 per cent in the same period last year.

However, mining, hit by rains and environmental concerns, contracted 0.4 per cent compared with a growth of 1.7 per cent in the same period last year.

Financing, real estate and business services grew a whopping 10 per cent in the quarter ended September 30 compared with 8.3 per cent in the same period last year.

Construction grew 4.3 per cent (3.1 per cent), while trade, hotels, transport and communications grew 4 per cent compared with 6.8 per cent during the July-September quarter last year.

“GDP growth is being driven primarily by agriculture with mild pick-up in industry,” said D.K. Joshi, chief economist of ICICI Bank.

Analysts expect the growth in farm income during the last quarter to reflect in stronger consumer demand in the third quarter spurring a mild industrial recovery.

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