growth across all sectors has taken economic growth for
the first quarter of 2006-07 to 8.9 per cent, one of the
highest ever quarterly growth rates in recent years. The
growth rate is well above consensus estimates by economists
and analysts and higher than 8.5 per cent reported for
the same quarter of previous year.
best performing sector was trade, hotels, transport and
communication, which saw an expansion of 13.2 per cent
over the previous year quarter when the sector had reported
a growth rate of 11.7 per cent. Telecom services was the
best performing component of this sector with a growth
rate of 48.9 per cent.
strong growth was aided by freight and passenger volume
growth of 10.7 per cent and 12 per cent by the railways
and a 32.2 per cent growth in air passenger traffic.
other services, financing, insurance, real estate and
business services expanded at 8.9 per cent while community,
personal and social services grew at 7.4 per cent as compared
to 8.8 per cent and 7.3 per cent respectively for the
previous year quarter. Credit growth for the banking sector
was 31 per cent during the period while deposits increased
by 19.6 per cent.
momentum in manufacturing remains very strong and the
sector has expanded at 11.3 per cent for the first quarter
of this year as compared to 10.7 per cent for the same
period of previous year. Growth in manufacturing was very
strong in all three months of the quarter with the best
performance coming in May at 12.64 per cent.
has been a decline in growth rates for the construction
sector, which was the best performer during the same period
of last year. Growth rate for this sector declined to
9.5 per cent from 12.4 per cent, possibly on the high
base effect. Within the construction sector, output growth
of cement declined to 9.9 per cent from 13.3 per cent
while steel output growth was at 6.8 per cent as compared
to 7.3 per cent during the previous year quarter.
is a slowdown in the electricity, gas and water supply
sector as well, where growth rate declined to 5.4 per
cent from 7.4 per cent a year ago. Mining output growth
improved to 3.4 per cent from 3.1 per cent.
held steady with a growth rate of 3.4 per cent. Production
growth of rice, coarse cereals, cotton and sugarcane was
very strong during the period while wheat production increased
by a very modest 1.2 per cent.
at factor cost at constant prices for the first quarter
was at Rs6.56 lakh crore as compared to Rs6.03 lakh crore
for the previous year quarter. At current prices, first
quarter GDP was at Rs8.35 lakh crore as compared to Rs7.35
price inflation (WPI) for the quarter was at 4.6 per cent
while consumer price inflation for industrial workers
was at 6.3 per cent.
economic expansion would put the RBI in a difficult situation
when it meets by next month-end to decide on interest
rates. While the RBI governor has repeatedly stated in
public that inflation expectations remain high, which
means he would prefer to keep monetary policy less accommodating
by raising or at least maintaining interest rates, the
finance minister is increasingly talking about reducing
interest rates to facilitate sustained growth.
central bank has maintained that, unless lower oil prices
sustain for a longer period, the chances of inflation
coming down is limited. Though the RBI may like to go
in for another modest rate hike next month, it may finally
be pressurised to maintain the status quo.