Manufacturing, services and construction drive the economy in spite of global problems and internal uncertainties. Wages are rising fast, but average income levels are still closer to two dollars per day. Inflation and government policies raise concern.

New Delhi (AsiaNews/Agencies) – India's GDP expanded by 9.6 per cent in the last financial year, the fastest pace since 1989. Domestic consumption is up, but not by as much even though sales of cars, mobile phones and motor-bikes are at a record high.

Government figures indicate that the growth rate for the year that ended 31 March 2007 was higher than expected. The faster growth will enable the government to reduce the budget deficit and spend more on plans aimed at reducing poverty, a heavy task in a nation where according to World Bank estimates more than half of the 1.1 billion people live on less than US$ 2 a day.

Still this is the third year in a row that growth has topped 9 per cent. “Despite global turbulence and heightened uncertainties our economy has been growing at the rate of 9.4 and 9.6 per cent,” Finance Minister Palaniappan Chidambaram said.

The minister expects the economy to continue expanding but at a slower rate because of “global uncertainties.”

Growth forecast for the current financial year ending 31 March 2008 will be announced in a few days.

Thus far in the current financial year, the economy grew by 9.3 per cent in the first quarter and 8.9 per cent in the second quarter.

High growth rate was achieved despite the rupee's 12.3 per cent appreciation against the US dollar last year, which at least helped cushion the impact of more expensive crude oil imports.

Widespread knowledge of English and the Internet have enabled India to provide services the world over, especially in data bank processing and services.

According to India’s Central Statistical Organisation, the transportation and communication grew by 16.6 per cent, manufacturing by 14.4 per cent, construction by 12 per cent, whilst agriculture, the traditional mainstay of the population, rose by only 3.6 per cent (against 6.1 per cent the previous year).

Wages rose an average 14.8 per cent in 2007, up from 14.4 per cent in the previous year, the second-highest salary increase in the Asia- Pacific region last year. per capita income was estimated at Rs 29,642 (about US$ 750) in 2006-07 against Rs 25,956 the previous year.

Inflation remains a problem though, which the government has tried to control through price controls, especially in the energy sector.

Inflation based on the wholesale price index has remained below 4 per cent since mid-August, partly reflecting moderation in the prices of primary food articles and some manufactured products items as well as base effects.

But inflation could jump as a result of higher international food and oil prices which have not yet been passed onto domestic consumers.

Since 2004 nine interest rate hikes have slowed consumer demand and dampened expansion.

Low-income families get subsidies from the government in the form of fixed prices of some items.

Indian Oil Corp, the nation's biggest refiner, loses the equivalent of US$ 43 million every day by selling gasoline, diesel and cooking fuel below market prices but is compensated by the government through bonds. This in turn is increasing the national debt and reducing the amount of resources available for public works.

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