Economy continues to grow, but pace may slow down

While most developed economies continue to worry about slowing growth and continued high unemployment, the Indian growth story continues. The country's GDP grew by 8.8 per cent during April-June quarter of 2010-11 fiscal against 6 per cent in the corresponding period of the previous year, according to figures released by the commerce ministry on Monday.

The impressive growth was led by manufacturing, even as certain sectors like financial services proved a restraining factor. Agriculture and allied activities grew by 2.8 per cent, higher than 1.9 per cent in the year-ago period, but it is nowhere near the target of 4 per cent pegged by the government in the medium term.

Manufacturing expanded by a strong 12.4 per cent in April-June, against a mere 3.8 per cent growth rate in the same period last year. Construction too grew by 7.5 per cent compared to 4.6 per cent.

Among services, financial, insurance and real estate services expanded by just 8 per cent against a growth rate of 11.8 per cent in the year-ago quarter, while community social and personal services growth (an important indicator on various social indices) slowed down to 6.7 per cent against 7.6 per cent a year ago. However, trade, hotels and communication services boosted the overall figures by rising 12.2 per cent, against 5.5 per cent during April-June 2009.

Though the GDP numbers for the April-June quarter are higher than that of 8.6 per cent in the previous quarter, they lag the optimistic forecasts of 8.9-9.4 per cent put forth by various experts.

Economists feel the country might not be able to keep up this pace in coming months. The growth rates of industrial production and exports, for instance, have begun falling. They say that those higher growth rates will be hard to achieve until India invests much more in its infrastructure, and government further loosens its grip over the economy.