India’s Economy Expands 7.9%

India’s economy expanded at the fastest pace in six quarters as manufacturing jumped, giving the central bank room to withdraw more stimulus measures., Bloomberg 11/30/2009 10:02:36 AM

Gross domestic product grew 7.9 percent in the three months to Sept. 30 from a year earlier after gaining 6.1 percent in the previous quarter, the statistics bureau said in New Delhi.

Manufacturing increased 9.2 percent last quarter, the most since June 2007, as companies including Mahindra & Mahindra Ltd. reported stronger sales. Trade, transport and communication services grew 8.5 percent, the fastest pace in a year, according to today’s report. Agriculture gained 0.9 percent, the least since December 2008.

To steer India’s $1.2 trillion economy through the worst global financial crisis since the 1930s, Subbarao has kept the central bank’s key reverse repurchase rate at a record-low 3.25 percent since April. Government spending and tax cuts took the value of stimulus measures to 12 percent of GDP.

Inflation pressures are building as economic growth quickens and after the weakest monsoon rains since 1972 hurt farm output, pushing up food costs. The central bank forecasts inflation of 6.5 percent by March 31 from 1.34 percent in October and 0.5 percent in September. During 2008, the rate rose to almost 13 percent.

Food inflation, which has climbed to 15.58 percent, is a politically sensitive issue in a nation where the World Bank estimates that three-quarters of the population live on less than $2 a day. Opposition lawmakers said last week that the government is obsessed with growth, allowing prices to spiral to the detriment of the poor.

By sustaining the second-fastest growth of any major economy, trailing only China, India is drawing investment from companies including South Korea’s Samsung Electronics Co. and French tiremaker Michelin & Cie, which said this month that it will add a factory in the southern state of Tamil Nadu.

Car sales climbed at a 33.9 percent annual pace in October and cellular operators, led by Tata Teleservices Ltd., added 16.6 million new subscribers. Lodha Developers Ltd., an Indian property company planning an initial share sale, said its home sales may climb about threefold this fiscal year as low interest rates encourage spending.

India’s Economy Expands 7.9%