New growth story

The fact that the boom in growth has been consumption-induced, services-dominated and credit-fuelled has implications for its sustainability. WITH the release of the quick estimates of national income, which show that gross domestic product (GDP) growth in 2006-07 touched 9.6 per cent, the government can legitimately claim that the recent acceleration in growth is not a short-lived phenomenon. After taking into account the performance in 2006-07, GDP growth as estimated by the Central Statistical Organisation (CSO) averages 8.75 per cent during the four-year period from 2003-04 to 2006-07 compared with just 4.67 per cent during the first three years of this decade. And, if forecasts by the Reserve Bank of India (RBI) and other sources are an indication, the advance estimates for 2007-08 are unlikely to be below this level. Five years of near 9 per cent growth do point to a new growth story. Underlying this turnaround in growth is a sudden step-up in the rates of investment (and saving) in the economy. Compared with an average level of 24.6 per cent during the four years from 1999-2000 to 2002-03, the gross domestic investment rate rose to 28.2 per cent in 2003-04 and then continued to climb to touch 35.9 per cent in 2006-07

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