Daily Management Review

With a Second Quarter Growth of 7.4% India Now Fastest Growing Large Economy


With a Second Quarter Growth of 7.4% India Now Fastest Growing Large Economy
With a reported growth rate of 7.4% in the second quarter, India becomes the fastest growing large economy on the planet.
And this growth rate eclipses the growth of China, one of the Indian governments stated aims.
The manufacturing industry provided the boost in growth, a sector of the Indian economy that had been lagging in the last few years. However the growth has been partly hampered by the performance of the farming sector. Experts are of the opinion that this sector will need much more reform if India of it is to match Chinese performance in the medium term.
Very recent government figures showed that the Indian economy grew by 7.4% in the second quarter which has outperformed the growth rate of China and was slightly ahead of analysts’ expectations.
According to statistics ministry data, the growth rate increased from 7% in the previous quarter to clock 7.4% year-on year during the three months to the end of September.
A survey of economists by Bloomberg News had predicted the second quarter growth rate at 7.3% and the actual growth rate outperformed by the predictions.
From a growth rate of 7.2% in the quarter ended in June the manufacturing output climbed 9.3% last quarter, according to the data released by the government.
While financing and insurance services growth accelerated to 9.7% from 8.9%, the trading and hotel services growth slowed to 10.6% from 12.8%.
On the other hand, farm production remained sluggish at 2.2% growth, slightly higher than 1.9% the previous quarter.
Experts however say that there is a certain contradiction in these figures. In the Western economies, very little importance is given to the farming sector. In the UK for example, the farming sector constitutes less than 1% of the country’s economy. On the other hand, the manufacturing sector accounts for just 12% of the British economy as the economy is almost completely dominated by the services sector. If there is growth in the services sector, there is inevitably a growth the general economy of the country irrespective of how the other sectors perform.
Farming is still the largest of the three sectors in India which is at a different stage of development. The sectoral sizes in India are going to have to change to match those of other rich countries if the economy is to become a rich country it is that in the long term. His can happen through the fast growth of the manufacturing and services sector.
The size of the agricultural sector, however, really determines the size of the total economy in the short to medium term. The monsoon probably matters more to growth in any one year than anything government does.
 While the agricultural sector is so important to India’s economy, the infrastructure within which the industry works is still appalling. There needs to be improvement, according to experts, in roads, storage, financing, distribution and logistics.