Economy grew 7.5% in 2004-5

India's economy grew at a healthy 7.5 per cent during the fiscal 2004-05 despite 0.7 per cent growth in agriculture.

Though the revised gross domestic product (GDP) for 2004-05 is higher than the earlier estimate of 6.9 per cent, it is lower than the GDP growth rate of 8.5 per cent for the fiscal 2003-04.

The revised GDP figures were released by the Central Statistical Organisation today on the basis of a new series of National Account Statistics with 1999-2000 as the revised base year, in place of the previous base year of 1993-94.

Finance Minister P Chidambaram said growth of 7.5 per cent during 2004-05 on the base of 8.5 per cent GDP growth the previous year was commendable, particularly since the agriculture sector had registered only 0.7 per cent growth due to a bad monsoon.

"Growth, I believe, is the best antidote to poverty. I am confident and hopeful that growth in 2005-06 will be better than 2004-05 and is likely to be close to 7.5 per cent in the second year of the UPA government also," Chidambaram told reporters.

The minister said growth in the agriculture sector was expected to be better in 2005-06 on account of a good monsoon.

"The rabi crop promises to be good," he said, but added that oil prices continued to be a cause for concern.

"There is an obligation on the government to maintain price stability and keep inflation under control. The inflation rate of 5-5.5 per cent, in my view, should also be brought down, but this is critically dependent on oil prices," he said.

The data also clearly indicated that issues in the infrastructure sector, particularly power, roads, airports, ports and railways, had to be addressed with a heightened sense of urgency. He said the GDP figures also confirmed his belief that people were saving more.

The gross domestic savings at current prices during 2004-05 constituted 29.1 per cent of the GDP, against 28.9 per cent the previous year, he pointed out, adding that savings were expected to be even higher in 2005-06.

He added that even the gross capital formation at current prices had increased to 30.1 per cent in 2004-05 against 27.2 per cent the previous year indicating greater capital investment.

In respect of the household sector, savings in the form of financial and physical assets had gone up to Rs 3,20,777 crore and Rs 3,66,302 crore respectively in 2004-05 from Rs 3,16,444 crore and Rs. 3,32,190 crore respectively in 2003-04.

Savings of the private sector had gone up to Rs 1,50,947 crore in 2004-05 from Rs 1,20,852 crore in 2003-04. Savings of the public sector showed an increase from Rs 28,026 crore in 2003-04 to Rs 69,390 crore in 2004-05.

Commenting on the surge in the Sensex, Chidambaram said there was no asset bubble anywhere and the government was monitoring the situation.

"We are looking carefully at the Price Earnings ratios. The Securities and Exchange Board of India and the capital market division is watching it carefully," he added.