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India's GDP to grow at 9.5% in FY'09: CMIE

Source: PTI
Last updated on: June 16, 2008 20:43 IST
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India's real GDP is expected to grow at an impressive 9.5 per cent in FY'09, the Centre for Monitoring Indian Economy said in its monthly review in Mumbai.

The Indian economy is heading towards the fourth consecutive year of an over 9 per cent growth and like in the last five years, growth this year too was expected to be driven by capital investments happening in India, CMIE said.

As per CMIE CapEx Service, projects worth Rs 340,000 crore (Rs 3400 billion) are scheduled for commissioning in FY'09. This would be the highest ever completion of investments in the Indian history, CMIE said.

The current growth phase of the Indian economy is driven by the capital investment boom in the country. India's GDP started rising by over eight per cent since FY'04. And, the gross capital formation grew in the range of 13-23 per cent during this period.

CMIE expects growth in GSF to accelerate to 18.7 per cent in FY'09 from 13.4 per cent in FY'08. This robust growth in GSF is expected to more than offset the moderation in the growth in private final consumption expenditure and Government final consumption expenditure.

CMIE stated that the PFCE is expected to grow by five per cent in FY'09, after growing by 7-9 per cent in the preceding three years. While the slower growth in the PFCE would mainly be on account of the higher base last year, the prevailing high inflation would also affect the consumption demand to some extent.

However, inflation is not expected to depress the PFCE dramatically as income levels in India have also gone up significantly in the last one year.

This is evident from over 20 per cent rise in wages and salaries of the manufacturing sector and the 57.6 per cent rise in income tax collection by the Government during FY 08.

Hence, despite a moderation, CMIE expects the growth in the PFCE to remain healthy.

Since the sole growth driver in FY 09 is going to be GCF, one may wonder 'what if all the projects do not get commissioned in FY 09?'

CMIE believe that even if half of the projects (scheduled for completion) get implementated, it would give a big push to the growth of the Indian economy.

It is the huge employment and demand for primary and intermediate goods generated during the implementation of these projects, which is more important than the actual commissioning of the capacities.

CMIE pointed out that the implementation of these huge investments to help the construction sector clock a robust 15 per cent growth in FY 09. Also, the implementation of these projects is going to lead to higher demand for machinery, steel, cement and other construction items.

Thus, the implementation of capital investments will continue to generate demand for goods and services and their completion would ensure that there are enough supplies to meet the freshly generated demand.

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