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Indian Economy Grew by 9.2% in Last Quarter

The Indian economy grew by 9.2% in the second quarter of the current fiscal year. The growth rate was faster than expected due to extremely strong growth in both the production and service sectors, as well as, public and government spending. Indian officials reported that the service sector, including real-estate and communication services grew by 13.9% in the quarter, while the manufacturing sector enjoyed growth of 11.9%. The agricultural output grew by 1.7%, after growing 3.4% a quarter earlier.

Experts expected that the second quarter growth will range around 8.0-8.7%, after the earlier quarter gave India a growth rate of 8.9%. India is the world`s second fastest growing economy, after China. The financial year that ended in March 2006 was India`s fastest growth year in a decade with a growth rate of 8.4%. The quarter`s growth rate mirrored the growth in wages and bank loans. Inflation in India remained over 5% during most of the year, resalting in speculation that India`s central bank will raise interest rates in its next policy meeting in January. The interest rate in India is currently 7.25%. India Lately lowered the price of fuel by 4% and diesel by 3%, after international oil prices dropped, in an attempt to battle inflation.

Kevan Watts, Chairman, Merrill Lynch International, UK, described the Indian financial and capital markets as well developed, but cautioned that financial services and software alone cannot carry the entire burden of growth." India needs better integration with the global economy across all sectors," Watts said. "On FDI, he felt that merely eliminating caps without changing attitudes would not help much," he added.