GDP up 7.4% as India’s growth picks up speed

India was the second fastest growing major economy globally during 2009-10, even as US grappled with unemployment and the Eurozone slid into a crisis.

The Indian economy grew 7.4 per cent for 2009-10, with a better than expected growth of 8.6 per cent in the Jan-March quarter. This growth came on back of a drought last year, which hit agriculture.

Better still for the economy, growth for the coming year 2010-11 is being pegged at an even higher 8.5 per cent. Over the medium term, stronger economic growth would mean higher corporate profits, salary hikes and a buoyant stock market. On Monday, the Union finance minister, Mr Pranab Mukherjee, said that the growth momentum of the fourth quarter would continue with 8.5 per cent growth in FY11. “The growth numbers are pleasant but not really surprising, because we were expecting them to be robust which they have turned out to be. This clearly indicates the momentum which is there in the economy and the expectations that the 8.5-percentage points estimation for 2010-11 is going to be a clear possibility,” said the finance secretary, Mr Ashok Chawla. Other estimates on FY11 are more cautious, but still peg growth at over 8 per cent. The Prime Minister, Dr Manmohan Singh, had said last week that the government is targeting an overall growth of 10 per cent for the country. The recovery is evident in other areas as well. Corporate profits are already recovering with many of the major players beating expectations. Large companies, including IT majors, have also announced pay hikes in the past few months.

The strong growth could see a roll-back of the stimulus measures brought out to combat the slowdown. The government had already cut back some of these sops during the budget. Another possibility going ahead is an interest rate hike by the RBI, to rein in inflation.