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India's economy grows 7.4 percent
(Agencies)
Updated: 2004-10-01 14:13
India's economy expanded 7.4 percent in the April-June quarter, surpassing
expectations and prompting some economists to revise their full-year growth
forecasts.
The latest government data, released Thursday, showed that a pickup in new
investments by Indian businesses and brisk growth in the services sector led the
economy's expansion.
Domestic companies have been bullish on new projects since India's gross
domestic product - the total value of goods and services produced by a country -
expanded 8.2 percent in the last fiscal year, its highest growth rate in 15
years.
During the April-June period, this fiscal year's first quarter, manufacturing
output increased 8 percent. On the services side, trade, hotels and
transportation grew 11 percent, compared with the same period a year earlier,
said the Central Statistical Organization. Agriculture grew 3.4 percent.
The stock market cheered the news and the benchmark index of the Bombay Stock
Exchange, the Sensex, closed 56 points, or 1 percent, higher Thursday. In early
trading Friday, the market was bullish.
Even though ``agriculture output is below trend, it is heartening to see that
the cyclical momentum (in industry and services) continues to be strong,''
Kishlaya Pathak, an economist with Standard Chartered Bank, told Dow Jones
Newswires.
Several economists and research bodies earlier predicted that economic growth
for the fiscal year ending March 2005 would be significantly lower than during
last year, because of a drought in some parts of the country and high oil prices
that have pushed up inflation.
The government has said it would be happy to see growth touch 6.5 percent
this year.
But the first fiscal figures have raised hopes that stronger growth in
manufacturing and services will more than offset the impact of a bad crop.
The industrial and services sectors account for 75 percent of India's GDP,
while the farm sector _ which employs nearly two-thirds of the country's work
force _ contributes a quarter of the national output.
``Services and manufacturing will be the key growth drivers,'' Pathak said,
adding that he planned to revise upward his earlier full-year growth estimate of
6 percent.
Some analysts believe high oil prices and inflation will not harm growth as
much as earlier feared.
``The impact of the monsoon and oil prices is overestimated,'' said Dominique
Dwor-Frecaut, emerging market strategist at Barclays Capital in Singapore. ``We
haven't yet seen the impact of the weak monsoon season, but I think we will
continue to be surprised on the upside.''
Dwor-Frecaut expects India's economy to expand 7.5 percent this
year.
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