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India economy grows by forecast-beating 8.9 percent

, On Tuesday 30 November 2010, 9:51 EST

India’s economy grew a forecast-beating 8.9 percent
year-on-year in July-September, data showed Tuesday,
underscoring the country’s brisk recovery from the global
financial crisis.

The healthy numbers brought temporary cheer to the Congress-led
government, buffeted by a string of scandals including a
damaging telecom corruption scam which could have cost the
public treasury up to 40 billion dollars.

The robust growth, propelled by manufacturing, services and a
revived farm sector, was significantly above market forecasts
of 8.2 percent growth.

The expansion came despite the rapid unwinding of massive
fiscal and monetary stimulus steps taken in the last few years
that helped shield the country of 1.2 billion people from the
global slump.

“These numbers are reassuring, especially with monetary and
fiscal stimulus being withdrawn — it shows the resilience of
this recovery,” D.K. Joshi, chief economist at ratings agency
Crisil, told AFP.

Adding to the good news for the government, first-quarter
growth was revised upwards to 8.9 percent year-on-year from 8.8
percent, data from the Central Statistical Organisation showed.

The South Asian country is the world’s second fastest-growing
major economy, behind regional rival China, which logged growth
of 9.6 percent year-on-year in the same three-month period.

Surging vehicle and other consumer product sales helped to
power the strong Indian performance, which is underpinned by
rising incomes and widening access to credit.

“Private consumption growth of close to 10 percent is pretty
close to a historic high,” Sujan Hajra, chief economist at
Mumbai brokerage Anand Rathi Financial Services, told AFP.

Manufacturing grew by 9.8 percent, construction grew by 8.8
percent while trade, hotels, transport and communication surged
12.1 percent. Farm output expanded by 4.4 percent thanks to a
bountiful monsoon.

The government aims to achieve double-digit expansion within
the next couple of years to reduce deeply entrenched poverty.
It seeks “inclusive growth” to embrace those left behind by
India’s boom.

Over 40 percent of Indians still live below the poverty line of
1.25 dollars a day, compared with 16 percent in China,
according to the World Bank.

The government expects the economy to expand 8.5 percent in the
financial year to March 31, 2011, after growing by 7.4 percent
last year.

Economists said the economy appeared on track to beat that

“The economy is poised to record its first annual expansion in
excess of 8.5 percent since the global downturn as domestic
demand continues to strengthen,” said Matt Robinson, senior
economist at Moody’s Analytics.

India’s finance secretary, Ashok Chawla, said the
1.3-trillion-dollar economy’s upturn was broad-based with all
sectors recovering.

The country posted average annual growth of 9.5 percent between
2006 and 2008 before the international financial slump.

Global investors have been pouring billions of dollars into
India’s stock market, seeking exposure to the country’s strong
growth, as industrialised economies are still struggling to
emerge from the downturn.

Economists say India’s strong performance could prompt the
central bank, which has hiked interest rates six times since
the start of the year, to press ahead with monetary tightening
— the most aggressive in the Asia Pacific region — to curb

Inflation, which is running at more than 8.5 percent, is
sharply above the central bank’s “comfort level” of four to
five percent.

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