Business Daily from THE HINDU group of publications
Thursday, Aug 07, 2008
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Business Daily from THE HINDU group of publications Thursday, Aug 07, 2008 ePaper | Mobile/PDA Version | Audio |
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Economy Industry & Economy - Economy Fears on overheating of economy allayed Contrary to the common perception, the GDP growth was sustained by the manufactured sector; the sector grew by 18 per cent over the last five years 
A file photo of Dr Arvind Virmani, Chief Economic Advisor Our Bureau Bangalore, Aug 06 The country was expected to maintain the high growth trajectory in the Eleventh Plan period despite the current high rates of inflation. Speaking at a CII conference on the state of the economy here today, the Chief Economic Advisor to the Ministry of Finance, Dr Arvind Virmani, said, “The average growth in the 11th Plan period will remain at 9 per cent.” He dismissed fears of any “overheating” in the economy. Dr Virmani said that inflation was a not major threat. The inflation in the country was largely driven by global cost push factors. He said that while the domestic Wholesale Price Index was 12 per cent, the U S Producer Price Index had risen by close to 15 per cent during the same period. About two thirds of the WPI inflation increase this year was on account of three sets of commodities – edible oils, iron & steel (including iron ore) and mineral oils. He also said that that contrary to common perception, the GDP growth was sustained by the manufactured sector. Manufacturing sector grew by 18 per cent over the last five years. Banking services growth was 8 per cent and other services that included information technology grew by only 7 per cent. He said that investment growth in the in the manufacturing sector was the highest at about 30.5 per cent per annum. The capital stock of the manufacturing sector as a result was at least 1.75 per cent at the end of 2007-08 over the corresponding period of 2002-03. In addition he said that the investment efficiency of the manufacturing sector also improved. Between 2002-03 and the 2006-07, the incremental capital output ratio of the manufacturing sector actually dropped by 1.9 per cent. This implied lower capital inputs in the sector. Dr Virmani said that domestic investments played a major in sustaining the high growth rate. Average investments in the country have grown by 18 per cent over the last five year. However, government expenditure’s role investment was far lower. High investments were driven by high savings rate. Domestic savings comprised about 36.1 of the gross domestic product. The Government was determined to sustain the momentum in the investment climate and reforms were under way. Dr Virmani said, “There are five pieces of legislation on reforms. The ones with the consensus will be pushed through.” Earlier, speaking to journalists, Dr. Virmani said, “Policy changes for stimulating investments would be taken.” These included passage of the pension reforms Bill. Asked about fears of a slowdown in the economy, Dr. Virmani said, “I would expect growth to be on the lower side of the estimates.” However, he added, that the index of industrial production due to be released next week would reveal the exact status. Replying to another question on interest rates, Dr. Virmani said, “The real rate of interest will become normal in a about a year’s time.” More Stories on : Economy | Economy
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