India's economy is expected to grow by 7.2 per cent this year. The latest
forecast indicates that economic recovery is on track in Asia's third largest
Government estimates released Monday indicate strong
growth in the industrial and services sector is helping the economy rebound
after slowing in the wake of the global financial crisis.
The forecast of
7.2 percent growth for the fiscal year that ends in March comes amid growing
optimism in India.
Consumers have returned to shopping malls, and sales
of cars and mobile phones have picked up rapidly in recent months. Many
companies are posting good profits and hiring new staff. Economists say India's
recovery has been largely driven by strong domestic consumption among its more
than one billion people.
Finance Secretary Ashok Chawla says that even
the agriculture sector, which has shrunk in the wake of a widespread drought
last year, could revive because of good winter harvests by farmers.
fourth quarter we are expecting it to be much better, more robust so overall
agriculture is not going to see the kind of dip which was initially out," Chawla
Although farming contributes relatively little to the country's
gross domestic product, it remains a key concern because two-thirds of the
country's population depend on agriculture for a living.
economists say uncertainties lie ahead. The shrinking agricultural output last
year has stoked high inflation and led to a huge jump in food prices. This in
turn has brought pressure on the government to scale back the stimulus measures
that infused billions of dollars into the economy and helped its
A top official at the Planning Commission, Montek Singh
Ahluwalia, says the government will have to contemplate tightening monetary
policy as the economy strengthens.
"It has been my consistent view that
if it looks that the economy is back on seven plus per cent growth path, which
it clearly now is, yes, we should say the stimulus has succeeded and we should
begin to phase it down," Ahluwalia said.
Stock markets and the private
sector have been wary of such a move by the government, hoping it will not set
back the tentative recovery.
However, the Indian government's estimates
of a return to a high growth path are backed by international institutions such
as the World Bank. In a report last month, the World Bank said that economic
revival in India remains resilient despite a slow global economic recovery.