Better agriculture performance to ensure economy growth of 8.6% in 2010-11

Despite the 9 policy rate hike that hit the industrial output negatively, India is expected to post economic growth of more than 8% when it reports data for the fourth quarter and entire 2010-11. India’s Chief Statistician T. C. A. Anant believes that better than expected performance of agriculture sector will ensure Indian economy grow by 8.6 % in 2010-11. According to a survey by FICCI Asia’s third largest economy, economy is estimated to grow by 8.2% in the fourth quarter of 2010-11. In the 15th round of survey of professional forecasters on macroeconomic indicators, carried out by the central banking institution, RBI expects India to grow by 8.2% for 2011-12. Previously RBI had forecast India to grow by 8.5%.

However, T. C .A. Anant expects the slow growth in Industry will not impact the overall expected GDP growth, as the agriculture growth was expected to be higher than 5.4% projected by advance estimates. Anant said, “On the final GDP numbers for 2010-11, I feel that industry will pull it down slightly, as IIP (index of industrial production) figures of November onwards haven’t been up to the mark. But, then, this will be compensated by agriculture, because the advanced estimates, which had pegged farm growth in 2010-11 at 5.4%, were based on numbers available till December-January. The final numbers could be even higher. Overall, I feel it will neutralize the impact of GDP”.

The agriculture sector is expected to show strong recovery because of good winter harvest, but the Manufacturing activities have been slowed because of RBI monetary policy strategy. RBI has been increasing its policy rate in order to tackle high inflation.

Indian economy is the second fastest growing economy followed by China and is capable to sustain its economic growth because of high domestic demand backed by increase in Income. However, because of high inflation, increase in global commodity prices and slow recovery in developed economies, many organizations have revised downwards their estimates for Indian economy growth. The finance ministry too has admitted that economic growth may not be as high as it was estimated in the economic survey at 9% for current fiscal year, due to high global commodity prices. RBI and many other organizations too have revised downward India’s growth projection.