The Indian economy registered a better-than-expected 6.7 per cent growth in 2008-09 despite the global financial meltdown adversely impacting its output in the second half of the fiscal year. This figure was slightly higher than the government's own prediction of 6.5 per cent, and considerably better than the five to 5.5 per cent growth forecast by most economists.
Nonetheless, this is the weakest economic performance in six years, with the growth rate considerably lower than the 9 per cent or above witnessed in the previous three years. It is in line with the 6.5-7 per cent growth range projected by the Reserve Bank of India for 2008-09.
The Central Statistical Organisation had in February this year pegged the advance GDP growth estimate for 2008-09 at 7.1 per cent.
The country's GDP grew 5.8 per cent in fourth quarter of 2008-09, lower than 8.6 per cent in the same quarter in the previous year, according to the data released by CSO on Friday. The third quarter GDP growth performance has now been revised upwards to 5.8 per cent from 5.3 per cent.
According to the CSO, the downward revision in GDP for 2008-09, at the revised estimate level, was mainly on account of the lower than anticipated performance in almost all sectors, excluding 'construction' and 'community, social and personal services'.
The sectors that saw growth rates above the average are construction (7.2 per cent), trade, hotels, transport and communication (9 per cent), financing, insurance, real estate and business services (7.8 per cent) and community, social and personal services' (13.1 per cent).
GDP at factor cost at constant (1999-2000) prices in 2008-09 is now estimated at Rs33,39,375 crore against the Rs33,51,653 crore estimated on 9 February, showing a growth rate of 6.7 per cent.
For the fourth quarter of 2008-09, GDP at factor cost at constant (1999-2000) prices is estimated at Rs9,02,924 crore, as against Rs8,53,785 crore in same quarter in previous year, showing a growth of 5.8 per cent.
Moody's Economy.com said in a note that the surprise upward revision of the December quarter GDP along with the solid result in the March quarter should inject some confidence into the Indian economy.
The note highlighted that the rise in expenditure on the election campaign may have boosted India's March quarter performance. However, the downside effects from the external turmoil have been far too strong to be fully offset by the jump in political spending, it said.
The reaction to the unexpectedly good news was immediate. The official data released on Friday morning saw stock markets rejoicing with the BSE sensex rising 329 points to cross 14,600 on a day when most market analysts had anticipated profit booking after a 700-point climb over the previous two trading sessions.
The growth bucks all global projections that had estimated below 6 per cent growth in Asia's third largest economy. Given the growth and rise in the rupee's value against the dollar, India is again a trillion-dollar economy. It also means per capita income has crossed Rs3,000 per month for the first time ever.
A report by Goldman Sachs pointed out that government consumption, which grew by 22 per cent in the fourth quarter, was the largest contributor to boosting growth.