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Strong
growth for Indian economy
The
Indian economy grew at 8% in the six months to September
compared with a year ago, meeting the target for growth set by
the finance ministry.
The
economy was boosted by growth in the tourism and financial
sectors, and a strong manufacturing
performance.
High
oil prices and sluggish exports failed to dampen the
figures.
The
data comes after Prime Minister Manmohan Singh said the
country should aim to speed growth to 10% in a few years - if
certain criteria were met.
For
this to happen, the savings rate needed to increase,
agricultural output had to make a 'quantum leap' and
infrastructure had to be substantially upgraded, Mr Singh
said.
Agriculture
drive
Government
data showed manufacturing growth averaging 10.2% in the six
month period, while services continued their strong
performance.
Financial
and real estate services grew at 9.1% in the first six months
of the financial year, compared with the same period a year
ago.
'This
is much better than expectations,' said Rajeev Malik,
economist with JP Morgan, Singapore.
'The
strength is mainly on account of industry and services, with
manufacturing continuing to do quite
well.'
Mr
Singh said the government was giving a big push to
agriculture, which has failed to keep pace with the broader
economy and has hampered India in its efforts to keep up
with China's high
growth.
Agricultural
output grew at 2% in the six months, unchanged from last
year.
Banks'
net falls 4% in '04-05
Even
as the demand for bank credit increased dramatically in ’04-05
following improvement in the investment schedule of India Inc,
the bottomline of commercial banks witnessed a setback. Their
aggregate net profit declined by 4.3% in ‘04-05 over that in
’03-04, as compared to an massive increase of 30.4% in the
previous year.
According
to the Reserve Bank of India (RBI), the' reduced profits
reflected mainly the lower treasury profits due mainly to
hardening of sovereign yields.' But for a sharp increase in
net interest income, driven by increased credit volumes that
mitigated to a considerable extent, the impact of a sharp
decline in non-interest income, the fall in the growth rate of
total income would have been even higher, felt the
RBI.
The
aggregate non-interest income of commercial banks declined by
11.9% in ’04-05 against an increase of 27.8% in the previous
year. Total income of the banks as a result, grew at a
considerably lower rate in ’04-05 compared with ’03-04 — up by
5.1% in ’04-05 as against 6.6% in the previous
year.
In
’04-05, the new private sector banks have succeeded in raising
their net profit by a spectacular 52.2% by containing
expenditure. Aggregate expenditure of these banks declined by
3.5%.
Old
private sector banks, too, have reduced their expenditure by
0.4% but yet have witnessed a sharp 69.9% fall in net profit
as their total income declined by 9%. Public sector banks, in
contrast, have witnessed a 4.6% decline in net profit,
following 8.9% rise in
expenditure.
Foreign
competition
India
is one of the world's fastest growing economies, is
increasingly open to foreign competition and is attracting
increasing amounts of overseas
funds.
In
total, $8.5bn has been invested in Indian shares from around
the world.
There
has been rapid growth in manufacturing and business services,
such as outsourcing, with large numbers of UK firms offshoring services
such as call centre and legal work to India.
Growth
has been at an annual rate of about 7% in recent
years.
But
Finance Minister P.Chidambaram has said the economy must be
more open to foreign competition to accelerate growth even
more. | 
