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India's economy logged the fastest growth in more than two years during April to June, fueled by buoyant manufacturing and mining.
The economy expanded 8.8% on an annual basis during April to June, data from the Central Statistical Organisation showed Tuesday. The latest growth figure was larger than the 8.6% in the previous quarter and matched economists' expectations. During April to June 2009, gross domestic product had climbed 6%.
On the production side, the manufacturing sector recorded an annual growth of 12.4% during April to June compared to a 3.8% expansion in the same period last year. Growth in the agriculture sector also increased in the quarter, rising to 2.8%.
Mining and quarrying showed 8.9% expansion, faster than the 8.2% rise in the previous year. At the same time, growth in electricity, gas and mining stagnated at 6.6%. Construction grew 7.5% after posting a 4.6% rise in the previous year.
Among services, financial, insurance and real estate services advanced at a slower pace of 8%. Annual growth in trade, hotels and communication services accelerated to 12.2%.
The government expects GDP to grow 8.5% in the current fiscal year. Deputy chairman of the Planning Commission Montek Singh Ahluwalia said last week that the economy could grow better than 8.5% in the year ending March 2011, up from 7.4% a year ago.
Citing better industrial production and its favorable impact on the services sector, the Reserve Bank of India in July lifted its economic growth outlook for 2010-11 to 8.5% from 8%. Also, wholesale price inflation estimate for March 2011 was upwardly revised to 6% from 5.5%.
The reverse repo rate, the rate at which the RBI borrows from banks, is currently at 4.5% and the repo rate, the rate at which the central bank lends, is at 5.75%. The interest rate was last hiked on July 27 to curb soaring inflation, the fourth rate hike this year.
Last week, RBI chief Duvvuri Subbarao said inflationary pressures in India are easing due to the improved supply position and the impact of the RBI's monetary tightening. Most recent data showed that India's food inflation eased to 10.05% in the week ended August 14 from 10.35% recorded in the week ended August 7.
In contrast to other indicators, a survey from Markit Economics showed a slower growth in India's private sector activity in July. Data released on August 4 showed that the HSBC composite output index fell to 61.9 in July from a twenty-three month high.
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