Indian economy grows faster than expected

The Congress-led Government, humbled by the recent electoral setback in Karnataka and reeling under three-and-a-half-year high inflation, got something to cheer about. The Indian economy did much better in the third and fourth quarter than what was widely anticipated. As against expectations of a sharp dip (some even predicted below 8% growth), GDP in the January-March quarter came in ahead of expectations, prompting the Government to revise up its estimate for the entire year. The bigger than expected growth was mainly due to revision in agriculture production.

Fourth-quarter GDP grew by 8.8% in the quarter ended March versus 9.7% in the same quarter last year. The number is much higher than most economists' estimates, who had forecast expansion of anywhere between 8-8.5%. The Government revised GDP growth for the October-December quarter, to 8.8% from 8.4%. The stronger than expected GDP growth in the third and fourth quarter enabled the Government to hike FY08 growth to 9% from the initial estimate of 8.7%. In FY07, the Indian economy had grown by 9.6%.

Sector-wise break up shows that growth in manufacturing, mining and agriculture decelerated in the fourth quarter while construction, electricity and services improved their performance. Manufacturing grew by just 5.8% in Q4 FY08 as against 12.8% in the year-ago period, while farm sector growth fell to 2.9% from 4.9% in the same quarter last year. Construction expanded by 12.6% versus 12.2%; trade, hotels, transport and telecom rose by 12.4% compared to 11.6% and finance, insurance and real estate grew by 10.5% versus 13.4%.