India is hot! The Oct-Dec quarter saw a growth rate of 10.4%, “powered by a surge in farm output and a strong performance in the manufacturing sector.” Writes WSJ:
On the strength of the growth in the October-December quarter, the economy is almost certain to overshoot the government’s forecast of 8.1% expansion for the fiscal year, which ends March 31.
The fiscal third-quarter expansion was the fastest since the government started compiling quarterly numbers in 1996. India’s gross domestic product grew 8.4% in the second quarter of fiscal 2003-2004 and 2% in the third quarter.
India’s economy is rebounding sharply after a drought slowed growth to 4% in the previous fiscal year. Agriculture, from which two-thirds of the country’s one billion-plus population derives its livelihood, is leading the recovery, with a sizzling 17% rise in the third quarter.
Higher rural incomes and the resulting consumer demand are boosting output in the services and manufacturing sectors. Output in the trade, transport, hotels and communications sector rose 13%, up from 12% in the second quarter. The manufacturing sector continued its robust performance in the October-December period, growing 7.4% on the year compared with 7.3% in the previous quarter.
“Although the difference in the third-quarter GDP numbers is due to agriculture, the good news is that manufacturing is also pretty good,” said M.R. Madhavan, strategist at Bank of America in Singapore. “If this momentum continues in the next fiscal year, overall economic growth would be strong even if the monsoon isn’t as good as in 2003,” Mr. Madhavan said.
Economists say the rising output in the manufacturing and services sectors indicates the underlying resilience of the economy.
JP Morgan senior economist Rajeev Malik said the Indian industry is poised for a “stellar” performance in 2003 as lower interest rates and easier access to credit will continue to boost consumer spending in the coming months. “Industrial activity will also get a boost from the current pickup in external demand,” he said. “Additionally, the economy is entering a new investment cycle, as many companies are planning fresh investments.”