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GDP grows 7.4% in April-June

Our Bureau

New Delhi , Sept. 30

THE Indian economy is on song, with a real gross domestic product growth of 7.4 per cent being registered during the first quarter of the current fiscal, against 5.3 per cent for the corresponding period of the previous year.

The higher growth rate has partly to do with the relative buoyancy experienced by the farm sector last year. Since the agriculture year runs from July to June — unlike the financial year (April-March) — this has resulted in the growth during the 2003-04 rabi season (ending June ) spilling over to the first quarter of the current fiscal.

Agricultural growth during April-June 2004 has, therefore, been higher at 3.4 per cent, compared to the 0.1 per cent year-on-year increase for April-June 2003. But on the other hand, the 3.4 per cent first quarter farm sector growth rate does not factor in this year's erratic monsoon rains, which, according to the Agriculture Ministry, has led to a 10.5 per cent decline in production of kharif foodgrains and a 9.2 per cent dip in oilseeds output.

What this means is that the impact of the indifferent monsoon and lacklustre kharif crop will be felt in the second and third quarters of the current fiscal. And given that this would come on the back of last year's excellent kharif harvest, one can expect a significant deceleration in the farm sector during the July-September and October-December quarters, thereby, pulling down the overall GDP growth rates as well.

It would be wrong, however, to attribute the higher first quarter real GDP growth entirely to agriculture. On the contrary, the real growth drivers have been the industry and services sector.

While industry has grown by 6.9 per cent during the first quarter of 2004-05, compared with last year's corresponding 6 per cent figure, the services sector, too, has notched up a 9.5 per cent year-on-year increase (7.4 per cent). In fact, had the farm sector not grown at all, the first quarter GDP growth rate would still have been a healthy 6.7 per cent.

Within industry, the manufacturing sub-sector has grown by 8.1 per cent, while the maximum growth in services has come from `trade, hotels, transport and communications' (11 per cent).

The upshot of all this is that even if agriculture records de-growth, the current fiscal might still end up witnessing an overall GDP growth of 6.5-7 per cent.

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