India Intelligence Report

   GDP Performs Above Expectation


Better Agriculture, Manufacturing, and Services sector performance saw the Gross Domestic Product (GDP) going up to 8.4% compared to 7.5% the previous year; the stock market actually collapsed despite the good news citing global concerns. Agriculture posted a good 3.9% compared to .7% last year, manufacturing by 9% (8.4%), and services which includes hotels, trade, transport, and communication by 11.5%. On the manufacturing side, construction seems to have slipped marginally from 12.5% to 12.1%.

There are however disconcerting declining in mining to .9% from 5.8% and only marginal increase in electricity sector from 4.3% to 5.3%. Prime Minister Manmohan Singh said that while he was happy with the results there should be “structural reforms” in these sectors to “sustain higher economic expansion.”

Interestingly, Singh said that there is no risk to growth even if the oil prices are reflected in domestic prices. Increased oil prices will no doubt cause inflation which will require a hike in interest rates which will curb growth. The alternative is to get more investments through the Foreign Direct Investment (FDI) and the Foreign Institutional Investment (FII) routes. Finance Minister P. Chidambaram said for increased flow of FDI, economic, procedural, political, and legal hurdles must be removed.

That is easier said than done because the biggest hurdles are the communists who want the investment but with the hurdles in place. Chidambaram did not say how he plans to get rid of these hurdles.




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