Manufacturing and mining are driving the economy. Agriculture is struggling after the worst monsoons in 37 years. However, there are fears it might stoke inflation, especially food prices.

New Delhi (AsiaNews/Agencies) – India’s Central Statistical Organisation on Sunday announced that India’s economy is expected to grow at a rate of 7.2 per cent in the year ending March 2010. Manufacturing (+8.9 per cent from 3.2 per cent) and mining (+ 8.7 per cent against 1.6 per cent a year earlier) will lead the economy. Agriculture should contract by 0.2 per cent, after being battered in 2009 by the worst monsoon in 37 years. The figures confirm data released by the Reserve Bank of India, the country’s central bank, which said it expected the GDP to grow to 7.5 per cent for this year.

This suggests that Asia’s third-largest economy is recovering quickly from the global economic slowdown and may act as a major leader in the world economy, whilst Western countries are still struggling.

Montek Singh Ahluwalia, deputy chairman of India’s planning commission, said that the latest figures supported government action. He added that growth could return to 8 per cent in the next fiscal year, close to levels achieved during the boom years of the mid-2000.

However, like most experts, he said that caution was needed until the next data are released. Many believe that the recovery is closely related to government stimulus, and prefer to wait to see what happens when the government ends fiscal stimulus. For others, it was too early to stop the stimulus as the economy was still at an early stage of recovery.

After starting to rise again, inflation tops the list of concerns. If unchecked, it could have a devastating effect on the poorest elements of India’s 1.1billion people.

India’s wholesale price inflation for this fiscal year rose from 8 per cent to 10 per cent. Food prices have recently grown at an annual rate of 17 per cent, according to government data. Other experts believe food prices rose even more and that the jump of the last few weeks is not going to stop any time soon.

For its part, the government said that there should be no food shortages and that the situation would improve over the next months as new harvests come in.

“While the key driver of the growth acceleration recovery process in [the financial year] 2010 was greater traction to policy measures, in 2011, even as the policy makers gradually withdraw the monetary and fiscal policy support, we expect the recovery trend to be sustained,” Chetan Ahya, an economist at Morgan Stanley, told the Financial Times.

Analysts sound a note of caution, arguing that we will know how accurate trends are only in a few months time. Never the less, they agree that the recovery should be rapid, even if some data are less optimistic than those of the government.

In a recent research note titled Global Outlook: Green shoot have arrived, Barclays Capital said that India’s real GDP growth for the calendar year 2009 would be 4 per cent, rising to 6 per cent in 2010. It was 9.1 per cent in 2007 and 6 per cent in 2008.

Stabilising consumption demand and falling inventories across the globe should set the scene for a positive pick up in industrial output.

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• economy
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• agriculture