The Hindu Business Line : GDP growth for 2006-07 revised upwards to 9.4%

The Central Statistical Organisation (CSO) has revised upwards the overall GDP growth estimate for 2006-07 to 9.4 per cent, from the 9.2 per cent `advance estimate' released on February 7.

Reassessed

The growth rate for industry has been reassessed at 10.9 per cent (from the earlier 10 per cent), with these being 11 per cent (11.2 per cent) for services and 2.7 per cent (2.7 per cent) for agriculture.

According to the CSO's revised estimates of national income for 2006-07, released here on Thursday, the country's real gross domestic product (GDP) grew by 9.1 per cent during the last quarter of the fiscal just ended.

This is on top of the 10 per cent year-on-year growth registered during January-March 2006.

A more significant pointer is the proportion of gross fixed capital formation (GFCF) to GDP at current prices, capturing the level of investment activity taking place.

During the January-March 2007 quarter, this ratio amounted to 30.2 per cent, which is higher than the 28.6 per cent, 29.9 per cent, 29.3 per cent, 28.7 per cent, 26.8 per cent, 29.2 per cent and 27.5 per cent for the preceding seven quarters.

On the other hand, the ratio of private final consumption expenditure (PFCE) to GDP in the latest recorded quarter, at 54.4 per cent, stood lower than the corresponding percentages — 56.5, 55.8, 59.5, 56.3, 57.9, 57.7 and 60 — of the earlier quarters.

Transition

What this suggests is a transition happening from a growth that was till now predominantly consumer-led to one that is increasingly investment-driven.

The earlier growth phase was basically fuelled by cheaper consumer credit and housing loans, and which, by all accounts, seems to be petering out.

To the extent this has been compensated by higher spending on plant and equipment by companies — which is what the rising GFCF-GDP ratio shows — it spells a continuation of the current growth story.

While consumer confidence may been somewhat dented by the recent hardening of interest rates, the same cannot be said about corporates, which have managed to raise around $25 billion of external commercial borrowings and leverage the capital gains from a strengthening rupee.