Indian economy expands at fastest pace in nearly three years
India's economy grew at its fastest pace in two and a half years in the second quarter on strong manufacturing growth and farm output that may keep the central bank raising rates.
The 8.8pc expansion in gross domestic product (GDP) compares with a median forecast of an annual rise of 8.7pc in a Reuters' poll and an 8.6pc expansion in the previous quarter.
The data underscores continued growth momentum in Asia's third-largest economy amid growing uncertainty over global recovery and may allow the Reserve Bank of India (RBI) to focus more on containing near double-digit inflation.
India's central bank has raised interest rates four times since mid-March to stamp down inflationary pressures and has said it may have to give precedence to containing inflation over other policy objectives.
It is widely expected to raise rates by another 50 basis points by end-2010, and some bond dealers expect a 25-basis points hike in key rates as early as in its September 16 policy review.
India's 10 year benchmark bond yield fell 2 basis points to 7.95pc after the data. It had closed at 7.99pc in the previous session.
The country's domestic-demand driven economy is benefiting from a buoyant consumer demand that is pushing up car sales and making factories produce to their optimum capacity.
Annual car sales in India rose 38pc in July.
Manufacturing grew 12.4pc, compared with 3.8pc in second quarter last year.
Its farm sector expanded 2.8pc and is expected to see robust growth on good monsoon rains, which is likely to further boost consumer demand by lifting rural income.
The economy is expected to grow 8.5pc in the current fiscal year to end-March 2011, after expanding an annual 7.4pc in the previous year.
But, a strong economic growth has also raised the spectre of capacity constraints, which analysts hold partly responsible for a persistently high headline inflation, which stood at 9.97pc last month.
Although India's wholesale price index in July rose at its slowest pace in six months, underlying price pressures remain.
The ruling Congress party has said that controlling prices must top the government's agenda in the face of popular discontent with price rises affecting hundreds of millions of people who live on under $1.25 a day.
No comments:
Post a Comment