India's economy grew 8.8 percent in the fiscal first quarter, its best performance since 2007, data showed Tuesday as the country returned to boom levels last seen before the financial crisis. The expansion between April and June was led by a 12.4 percent year-on-year surge in manufacturing, a 9.7 percent leap in services and an 8.9 percent jump in construction, official figures showed.
India's impressive numbers came as the outlook for many developed economies is deteriorating and fears mount that solid growth rates in emerging Asia could falter. "India is flying," said HSBC economist Frederic Neumann, noting the economy showed no signs of a double-dip slowdown.
The last time Asia's third-largest economy grew at a faster pace was in the final three months of 2007, when it expanded 9.7 percent. The South Asian country, home to 1.2 billion people, is the world's second-fastest growing major economy, slightly behind regional rival China, which logged growth of 10.3 percent in the same three-month period.
Both countries have been unwinding huge stimulus spending put in place in the wake of the global financial crisis. India's economy was also boosted by better farm output that expanded 2.8 percent, according to the data which was in line with forecasts. But economists warned India had probably posted its strongest growth figures for the fiscal year to March 2011 after recent data pointed to a deceleration in industrial output with exports to key developed markets sagging.
"The figure of 8.8 percent was probably the best performance we're going to see this year," Shubhada Rao, chief economist at India's Yes Bank, told AFP. Still, economists forecast India will post full-year growth to March 2011 of around 8.5 percent - enviable compared with anaemic levels of advanced economies.
The figures for the first quarter marked an acceleration compared to the previous quarter, when growth was clocked at 8.6 percent. "We would be surprised if world trends worsen to the extent that India's prospects are severely impacted," said London-based Capital Markets economist Kevin Grice. India's still inward-looking economy is mainly driven by domestic demand, with exports accounting for less than 20 percent of gross domestic product.
Senior government economic advisor Montek Singh Ahluwalia forecast growth would be "slightly better" than the 8.5 percent for the year projected by the government. Declining manufacturing output would be offset by a strong farm performance, helped by a bountiful monsoon, he said. The economy expanded 7.4 percent last year.
At the same time, economists suggested the central bank, which has hiked rates four times since the start of the year to curb inflation, may pause in its monetary tightening - the most aggressive in the Asia-Pacific region - in the face of the shaky global outlook.
"While there's a growing sense of confidence about the broad-based nature of growth, softer global growth puts a question mark over the timing of the next rate hike," said Yes Bank's Rao. Industry bodies pushed for the central bank to take a go-slow approach.
Inflation has eased from double-digit levels to 9.97 percent, its lowest since February, and government officials expect it to soften further following good harvests. Before the financial crisis, India was averaging annual growth of nine percent. It escaped the worst of the global crunch, with its banking sector spared any major damage and now rising personal incomes have boosted domestic demand for cars, mobile telephones and other consumer durables. However, Premier Manmohan Singh says the economy needs double-digit growth to lift hundreds of millions of Indians out of abject poverty.
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