Indian economy expected to grow at 9 per cent in 2011-12

The Indian economy is expected to grow at 8.6 per cent in 2010-11 and by 9.0 per cent in 2011-12, helped by rising domestic savings and investment, despite slow recovery in global economic and financial situation.

However, fiscal consolidation will remain a long term challenge for the government with the consolidated fiscal deficit of the central and state governments rising to 7.5 to 8 per cent of the country's gross domestic product (GDP), the prime minister's economic advisory commission said in its Review of Economy for 2010-11.  
 
While the current year fiscal adjustment may not be a problem, the challenge is of adhering to the Finance Commission's targets with credible expenditure management, the report released by the PM's economic advisor C Rangarajan said.

While the review has projected a 9.0 per cent GDP growth in 2011-12, it has projected a fall in growth of agriculture from 5.4 per cent in 2010-11 to 3.0 per cent in 2011-12. This, however, may be attributed to a higher base effect.

Industry growth, however, is expected to pick up from 8.1 per cent in 2010-11 to 9.2 per cent in 2011-12.

The service sector is expected to grow at 9.6 per cent in 2010-11 and by 10.3 per cent in 2011-12.

The review has projected investment rate at 37.0 per cent in 2010-11 and 37.5 per cent in 2011-12.