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Economy logs a record

Special Correspondent

9.1 p.c. growth in first six months of current year

— PHOTO: Kamal Narang

BUOYANT: Finance Minister P. Chidambaram (left), with the Revenue Secretary, K. M. Chandrashekar, addressing a press conference in New Delhi on Friday.

NEW DELHI: The GDP growth of over nine per cent in the first six months of 2006-07 has raised expectations that this fiscal can be exceptional for the economy even as concerns about rising prices remain. This is for the third time that India has witnessed a GDP growth of over 9 per cent.

"All macro-economic parameters are good, but the inflation rate is the only worrying factor,'' Finance Minister P. Chidambaram said, encouraged by the economy expanding by 9.1 per cent during the reference period — the highest since reforms were unleashed.

Noting that this growth was not "accidental,'' he told reporters here on Thursday, after the release of the data, that the good show was on account of a 9.2 per cent growth in the July-September quarter.

The economy advanced by 9.1 per cent in the first six months of this fiscal, the highest for the April-September period in any year since 1991-92. Incidentally, the GDP, Asia's fourth largest economy, had recorded an 8.4 per cent growth in the second quarter of 2005-06.

Only twice in the past, the quarterly figure has been bettered, he added. The GDP grew by 9.3 per cent in the fourth quarter of 2005-06 and 11.3 per cent in the third quarter of 2003-04 (under the NDA Government).

The Finance Minister, however, observed that the 11.3 per cent growth in 2004-05 should be taken with a caveat since it was on the base of a low 1.5 per cent growth (in the previous year).

While manufacturing grew by 11.9 per cent in the second quarter this year compared to 11.3 per cent in the first quarter, construction was up 9.8 per cent against 9.5 per cent. Services like trade, hotels, transport and communication grew by 13.9 per cent against 13.2 per cent, financing, insurance, real estate and business services by 9.5 per cent against 8.9 per cent and community, social and personal services by 6.9 per cent compared to 7.4 per cent.

However, agriculture along with allied activities grew by just 1.7 per cent in the second quarter against 3.4 per cent in the first quarter.

Ordinarily the second quarter is a lean period for agriculture, he remarked while expressing the hope that it would improve with better rabi crops in the coming months.

Mining and quarrying exhibited a growth of 3.1 per cent during the second quarter against 3.4 in the first quarter.

"... The fact that the economy recorded the highest growth of 9.1 per cent in the first half of any fiscal since economic reforms began in 1991-92 makes us doubly happy... I hope that the current year turns out to be one of the best years of economic growth,'' Mr. Chidambaram said.

When asked whether he expected the economy to clock nine per cent growth rate this fiscal, he said: "There is no limit to my expectations. Why should I limit my expectations?"

Interest rates

The Finance Minister indicated that the high growth would not put pressure on interest rates, as liquidity was comfortable in the economy. The RBI mopped up bids worth Rs. 11,925 crore through the reverse repo mechanism on Wednesday.

About overheating of the economy, he endorsed the RBI Deputy Governor's remarks that it was premature and wrong to put the word "overheating'' for the Indian economy and observed that the inflation rate was the only concern. Mr. Chidambaram said: "It (the inflation rate) is slightly higher than we would have liked, but then I have said it is largely driven by supply side constraints.'' However, he sounded confident that the inflation rate would be tamed with better supply side management, new sugar arriving and new crop of wheat expected early next year.

The inflation rate stood at 5.29 per cent during the week ended November 11, within the 5-5.5 per cent range forecast by the RBI for 2006-07.

The Finance Minister said with the economy growing at high rate, some kind of inflation was inevitable. At current growth rates, the inflation rate of around four per cent was tolerable and that was where the Government intended to bring it down in due course, he said.

He said: "We should bring the inflation rate below five per cent and we must move toward four per cent,'' he added.

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