India’s economy expands faster-than-estimated 8.9 percent
NEW DELHI: Improved infrastructure will prove critical to sustaining India's expansion rate, Prime Minister Manmohan Singh said this month as inflation runs almost double what the government regards as "ideal."
India's economy grew more than economists estimated last quarter, adding to evidence of a strengthening in domestic demand that's stoked inflation by placing strains on the nation's transport and power systems.
Gross domestic product rose 8.9 percent in the three months through September from a year earlier, matching the revised pace of growth in the previous quarter, the Central Statistical Organisation said in a statement in New Delhi today.
That was above the 8.2 percent median estimate of 30 economists in a Bloomberg News survey.
Improved infrastructure will prove critical to sustaining India's expansion rate, Prime Minister Manmohan Singh said this month as inflation runs almost double what the government regards as "ideal." The Reserve Bank of India may need to resume raising interest rates in the coming months after lifting borrowing costs six times this year.
"Inflationary pressures remain high as strong growth fuels consumer demand amid rising capacity constraints," said Vishnu Varathan, a Singapore-based economist at Capital Economics Ltd. "The Reserve Bank will have to come back and probably raise rates further early next quarter to ensure inflation remains under control."
Central bank Governor Duvvuri Subbarao on Nov. 2 raised the benchmark repurchase rate and the reverse repurchase rate by a quarter-point each to 6.25 percent and 5.25 percent, saying inflation continues to hold above the "comfort zone."
The wholesale-price inflation rate was 8.58 percent in October, compared with the "ideal" level of 4 percent to 5 percent, according to Finance Minister Pranab Mukherjee. Consumer prices are rising at a pace near 10 percent, the fastest in the Group of 20 nations after Argentina.
India's GDP gain last quarter compares with an expansion of 1.9 percent in the 16-nation Euro area, 2.5 percent in the U.S. and 9.6 percent in China.
The Organization for Economic Cooperation and Development on Nov. 18 said high levels of unemployment in the U.S., Europe's sovereign-debt crisis and growing trade imbalances around the world pose risks to the global recovery.
Faster growth is boosting revenue for Prime Minister Singh's government, giving him room to cut the budget deficit to a targeted 5.5 percent of GDP from a 16-year high of 6.9 percent last year, even as spending on oil and fertilizer subsidies rises. -PB News
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