The Hindu Business Line : 2006-07 GDP growth revised upwards to 9.6%

New Delhi, Jan 31 The Indian economy grew by 9.6 per cent in 2006-07, the second highest in recorded history after the 10.5 per cent registered in 1988-89.

The 9.6 per cent figure based on the ‘quick estimates’ of national income for 2006-07, released by the Central Statistical Organisation (CSO) here on Thursday, is higher than the earlier ‘revised estimate’ of 9.4 per cent and ‘advance estimate’ of 9.2 per cent made on May 31 and February 7, respectively.

The 9.6 per cent growth rate for 2006-07 comes over and above a 9.4 per cent jump in the real gross domestic product (GDP) recorded during the preceding fiscal.

This makes it superior to the all-time-high of 10.5 per cent for 1988-89, which was on a much lower growth base of 3.8 per cent in 1987-88 (a drought year).

Buoyant phase

The period from 2003-04 to 2006-07 has marked the most buoyant phase of the country’s economy since Independence.

The CSO is scheduled to release the ‘advance estimates’ of national income for 2007-08 in the coming week.

Going by present indications, a GDP growth of 8.5 per cent plus seems likely in the current fiscal.

If that is confirmed by next week’s CSO data, it would translate into an unprecedented, consecutive five years of growth rates in excess of 7.4 per cent.

Of these five years, the first one (2003-04) coincided with the tenure of the Bharatiya Janata Party-led Government, while the remaining four have been under the ruling Congress-headed United Progressive Alliance (UPA) dispensation.

Growth drivers

The 9.6 per cent overall GDP increase for 2006-07 was powered mainly by services and industry, which grew by 11.2 per cent and 10.6 per cent, respectively.

This was against their corresponding previous year’s levels of 11 per cent and eight per cent.

On the other hand, the farm sector decelerated from 5.9 per cent to 3.8 per cent.

The other notable feature of 2006-07 was the savings rate (gross savings as a proportion of GDP at current market prices), which touched a record 34.8 per cent. This compared to 34.3 per cent, 31.8 per cent, 29.8 per cent, 26.4 per cent and 23.5 per cent in the preceding five years. Over this period, the investment rate (gross capital formation as a proportion of GDP at current market prices), too, climbed from 22.8 per cent to 25.2 per cent, 28.2 per cent, 32.2 per cent, 35.5 per cent and 35.9 per cent.

This clearly reflects a transition of the Indian economy to the league of China the East Asian Tigers. Sustaining this pace is, of course, going to be a challenge for the present as well as future Governments.

During 2006-07, the country’s GDP at current market prices -- the gross value of goods and services produced within its territory -- was assessed at Rs 41,45,810 crore. At an average exchange rate of Rs 40 to a dollar, that works out to well over one trillion dollars.

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