25 Jan 2010 12:53 PM

Real GDP will advance to pre-crisis levels in 2010-11

The Indian economy is fast returning to pre-crisis levels.

Real GDP is projected to grow by an impressive 9.2 per cent in 2010-11, as compared to an estimated 6.9 per cent in 2009-10. Industry, agriculture and services are all expected to do well. Before the emergence of the Global Liquidity Crisis in September 2008, the economy had recorded more than nine per cent growth per annum between 2005-06 and 2007-08.

Consumer spending has bounced back strongly in the September 2009 quarter, and Private Final Consumption Expenditure is projected to expand by 6.5 per cent in 2010-11. Inflation in food-related items will decline significantly to 8 per cent in 2010-11, from an estimated 14.5 per cent in 2009-10.

Kharif crop production is projected to be good, assuming that rainfall is normal. Output of major agricultural crops is expected to grow by 10.8 per cent in 2010-11, after two years of decline. This will be propelled by higher yield and expansion in acreage in response to higher prices for agricultural commodities.

Corporate India will return to its growth trajectory from the December 2009 quarter. The growth in industrial production is expected to accelerate to 9.4 per cent in 2010-11, from 8.4 per cent estimated for 2009-10. There will be an increase in demand too, as corporate wages and rural incomes rise. Record capacity additions will help the industry to meet this incremental demand comfortably.

Investment activities stayed intact throughout the crisis period. They will continue to remain robust in 2010-11. Lending rates remained stable in December 2009. They will continue to do so during 2010-11 as well, due to comfortable liquidity conditions.

Higher overseas inflows will ensure that the exchange rate of the Indian rupee averages at Rs 43 against the dollar in 2010-11. During the current year, it has averaged Rs 47.8 per dollar till 15 January 2010.

Clearly, the Indian economy's abundant reserves of resilience and fortitude are back on display.

Krishna Warrier
kwarrier@cmie.com