GDP to grow at 8.4 per cent-RBI

GDP to grow at 8.4 per cent: RBI


The Gross Domestic Product (GDP) of the country is expected to grow at 8.4 per cent in 2010-11, the Reserve Bank of India said in its Macroeconomic and Monetary Developments report on Monday. It is higher than the previous estimate of 8.2 per cent growth reported in the previous round of the survey in April 2010.

The report serves as a background to the first quarter review of monetary policy 2010-11 to be announced on July 27, 2010.

The report said that going by the progress of monsoon, the agriculture output is expected to be better this financial year with a growth rate of 4.1 per cent compared to 4 per cent previous year. The service sector is expected to grow at 9.1 per cent against 9 per cent earlier, while the industry output is likely to remain unchanged at 9 per cent.

The survey noted that private consumption and investment demand will be the two major drivers of growth during 2010-11. “Private investment demand recovered sharply in the last quarter of 2009-10. Production trends in capital goods point to continuation of the strong investment activities in the near-term,” it added.
It further said that pick-up in demand for credit from the private sector, rapid growth in corporate sales, and information on order books available from forward looking surveys indicate strengthening of domestic demand.

RBI predicted an improved fiscal situation in 2010-11 owing to larger than expected mobilisation from 3G/ Broadband Wireless Access (BWA) spectrum auctions, which together represent 1 per cent point of GDP and the partial deregulation/upward revision to the prices of petroleum products.

The report hinted at tighter monetary policies to check inflation, which remains a worry for the economy.

“Given the risks to inclusive growth from high inflation, the monetary unwinding that started in October 2009 should continue till inflation expectations are firmly anchored and inflation is brought down,” it added.

Headline WPI inflation has been in double digits since February 2010. Non-food manufacturing inflation accelerated from near zero in November 2009 to 7.3 per cent in June 2010, reflecting the impact of rising input costs, recovering private demand and associated return of pricing power.