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
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
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.