‘8.1% growth, can do better’

Despite a 1.8 per cent fall in the agricultural growth rate, the Indian economy still grew by 8.1 per cent during first quarter of this fisc...

Despite a 1.8 per cent fall in the agricultural growth rate, the Indian economy still grew by 8.1 per cent during first quarter of this fiscal compared to a growth of 7.6 per cent during the same period last year.

According to data released by the Central Statistical Organisation today, during the first quarter of this fiscal (April-June), agricultural growth was 2 per cent while for the same period last year, the growth was 3.8 per cent.

But a break-up of the first quarter data shows that the 8.1 per cent growth was possible only on account of an increase in the growth rate of industry and the services sectors, which for the first quarter were 9.7 per cent and 9.8 per cent respectively. By comparison, during the same period last year, the growth in industry was 6.8 per cent while that of services was 9.5 per cent.

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With these statistics in hand, Finance Minister P. Chidambaram said there was “good” and “not-so good” news and “by and large we are happy with these results…we can and ought to do better”.

The FM made it clear that it was important to maintain this growth in industry to compensate for the low growth rate in agriculture, which has a 23 per cent share in the gross domestic product (GDP).

On services, where growth was already a high 9.8 per cent, he said the aim should be to ensure double-digit growth through improving efficiency in all private and public sector service industries like BSNL, MTNL, aviation etc and ensuring “that sand is not thrown into the wheels” of this sector.

While stimulating higher growth in agriculture was an important objective for the government, a combination of factors such as flow of credit, inadequate rains, are responsible for the slow down in agricultural growth rates. It’s here that the FM reiterated the Prime Minister’s message to step up investments in irrigation (for instance) to boost agricultural growth.

But these investments could only come through the surpluses created through industry, he said. Therefore, the message from him was to “continue the reform process” and even liberalise those sectors of the economy that are closed for private investments.

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While he did not specify the sectors, he did mention that more investments (domestic and FDI) were needed in mining, steel, power, shipping, aviation, construction etc.

A closer look at Q1 data makes it clear why the FM pointed out items such as mining. Of the sectors that comprise industry, growth in mining and quarrying is the only area that registered a fall in growth — down to 3.2 per cent compared to last quarter’s 6.9 per cent.