Industry cheers as India’s growth hastens to 6.1 percent

New Delhi, Aug 31 ( India’s economic growth logged a notable acceleration to 6.1 percent for the first quarter of this fiscal from 5.8 percent for the quarter before due to strong showing by various services industries, official data showed Monday.

The growth registered by the farm sector at 2.4 percent and manufacturing at 3.4 percent remained below the overall expansion, showed the data on the country’s gross domestic product (GDP) released by the Central Statistical Organisation (CSO) here.

“It is consistent with what we have been maintaining,” said Planning Commission Deputy Chairman Montek Singh Ahluwalia. “This definitely shows the worst is finally over,” he told reporters here, reacting to the national income numbers.

The best performance was from trade, hotels, transport and communications group, as also the financial services and real estate sectors with an 8.1 percent expansion each, while mining came next with 7.9 percent, followed by construction with 7.1 percent.

“The Indian economy has emerged from the disruption created by the global financial crisis,” said Chandrajit Banerjee, director general of the Confederation of Indian Industry (CII). “The numbers indicate the economy has bottomed out.”

Sharing similar sentiments, Harsh Pati Singhania, president of the Federation of Indian Chambers of Commerce and Industry (FICCI), said the chamber expected some sectors, especially services, to accelerate their growth in the ensuing months.

“This growth on a sequential basis – from 5.8 percent in the fourth quarter of 2008-09 to 6.1 percent in the first quarter in 2009-10 – is an indication of a turnaround in the economy,” Singhania said in a statement.

“The economy will gradually bounce back on higher growth path as cement, steel and even real estate has started picking up. Likewise, core infrastructure will also restore its growth pace,” added the Associated Chambers of Commerce and Industry (Assocham).

The research arm of global rating agency Moody’s, however, warned that although the growth of the Indian economy during the first quarter of this fiscal was on predictable lines, the downside risks remained.

“Although global economic conditions have finally stabilized, as reflected in the GDP numbers recently released around the world, India’s battle against downside risks is far from over,” said Moody’

“The drag from exports and foreign investment may have moderated or even ended, but the drought has emerged as a new major challenge in India,” it said, adding that farm output was especially expected to take a tumble this year.

“As primary industry is hurt, the rest of the production chain will experience flow-on effects. For instance, a sharp decline in farm output is expected to reduce demand for transport and storage services, and the supply for exports could also plummet.”