GDP powers ahead, posts 8.1% growth

Industry, services star in surprise first-quarter story.

Driven by a double-digit growth in the manufacturing and services sectors, the economy grew 8.1 per cent in the April-June quarter of this fiscal against a 7.6 per cent growth in the corresponding quarter of the previous fiscal.

"This is extraordinary growth, way beyond expectations. It should make most people reassess growth prospects for the full year upwards," said Saumitra Chaudhuri, member of the PM's Economic Advisory Council.

The growth is 100 basis points above what Finance Minister P Chidambaram had said it would be as he held talks with the IMF board of governors in Washington last week.

The last time quarterly growth in gross domestic product had crossed 8 per cent was in 2002-03, when the economy grew at 8.8 per cent, 11 per cent and 8.4 per cent in the second, third and fourth quarters, respectively.

Manufacturing grew 11.3 per cent in April-June 2005-06 against 7.9 per cent in the same period in 2004-05, while trade, hotels, transport and communications grew 12.4 per cent, up from 11.5 per cent in the corresponding period last year.

"The over-8 per cent growth rate is also on a lower base," pointed out DK Joshi, senior economist, Crisil.

"Manufacturing and mining is not a surprise, but most people expected the trade, hotels, transport and communications segments to cool off after two consequtive quarters of high growth," Chaudhuri said.

The GDP at factor cost, a measure of goods produced and services offered in the economy, was Rs 3,82,534 crore during the first quarter of 2005-06 against Rs 3,53,717 crore during the corresponding period last year. Nominal GDP at current prices grew 12.8 per cent during the quarter compared with 12 per cent last year.

Agriculture growth dipped to 2 per cent from 3.8 per cent in the corresponding period last year, while growth in the mining and quarrying sector was also down to 3.2 per cent, less than half of the 6.9 per cent growth it recorded in the first quarter last year, according to figures released by the Central Statistical Organisation today.

But not much could be read into the agriculture numbers, Chaudhuri said. "Q1 captures the tail end of the rabi season and preparations for the kharif harvest. What really matters in agriculture is Q2 and Q3," he added.

Financing, insurance, real estate and business services grew by 8.3 per cent in the first quarter of this fiscal, up from 7 per cent in the same period, last year. The community, social and personal services growth was lower at 6.1 per cent during April-June 2005 compared with 8.2 per cent in the first quarter last year.

Growth in electricity, gas and water supply was at 7.9 per cent in the first three months of this fiscal, against 6.1 per cent a year ago. Construction activities also did well, expanding by 7.9 per cent during the first quarter, against 5 per cent growth in the same quarter in 2004.