Economy set to grow at 9.2%

Outperforms official targets; No overheating: chief economic advisor.

Continued buoyancy in manufacturing and services will see the Indian economy grow 9.2 per cent in 2006-07, making it the second consecutive year that the economy has grown at this rate, according to advance estimates of national income from the government's Central Statistical Organisation (CSO).

These numbers come a week after the government revised 2005-06 GDP growth from 8.4 per cent to 9 per cent. They surpass initial CSO estimates of 8.1 per cent and Reserve Bank's revised estimates of 8.5-9 per cent. This is also the fastest growth since 1989. 

ON A HIGH % change over previous year
Industry	2005-06	2006-07
Agriculture, forestry & fishing	6.00	2.70
Mining & quarrying	3.60	4.50
Manufacturing	9.10	11.30
Electricity, gas & water supply	5.30	7.70
Construction	14.20	9.40
Trade, hotels, transport & communication	10.40	13.00
Financing, insurance, real estate & business services	10.90	11.10
Community, social & personal services	7.70	7.80

Reacting positively to the advance estimates, the benchmark BSE Sensex jumped 164.94 points, a 1.14 per cent increase, to close at 14,643.13.

"We are happy to note that the estimate for GDP growth at constant prices is 9.2 per cent. This is particularly gratifying because it is upon a base year growth of 9 per cent in 2005-06," Finance Minister P Chidambaram said in a statement today.

The advance estimates peg manufacturing growth at 11.3 per cent, against 9.1 per cent a year ago, and services at 11.2 per cent (9.8 per cent a year ago).

However, agricultural growth at 2.7 per cent is slower than the targeted 4 per cent and 6 per cent in the previous year.

A growth rate of 9.2 per cent suggests that the country could touch its Plan target of 8 per cent for the first time since the five-year plans began in 1950. Average growth has been 7.7 per cent so far, but Planning Commission Deputy Chairman Montek Singh Ahluwalia today said the 8 per cent growth rate was difficult but achievable.

GDP growth of 9.2 per cent also raises the possibility of a lower fiscal deficit. If the government contains its fiscal deficit at Rs 1,48,686 crore during the year and the current revenue buoyancy continues, Chidambaram will be able to announce a fiscal deficit of around 3.6 per cent of GDP, against the targeted 3.8 per cent.

Dispelling fears about the economy overheating, the finance ministry's chief economic advisor Ashok Lahiri said there were no signs of this happening. "Does high growth entail overheating? My categorical answer is no," he said.

"If you have ambitions of developing and (reducing) eradicating poverty, the economy needs to grow like this for decades," Lahiri added, underlining that the country could sustain high growth.

Experts agree that India will continue to record high growth rates. "The 9.2 per cent advance estimate of GDP growth does not surprise me, after 9.1 per cent growth in the first half of the year. The final figure may not be very far from the advance estimates," said Subir Gokarn, chief economist, CRISIL.