Indian Economy - Q2 FY10 update

India GDP growth rates. RBI estimate for the year is at 6.5% for FY10.


The Gross Domestic Product (GDP) expanded during the second quarter (July – September) of the fiscal year 2010 by 7.9%. The key drivers for this strong figure are:

• Pickup in manufacturing sector (9.2% vs 5.1%)
• Increased government expenditure 
• Lower interest rates
• Higher government salaries & pay commission arrears
• Increased incomes especially in the rural areas due to greater social spending and high farm goods prices
• Modest growth in farm output despite drought (0.9% vs 2.7%)

Better than expected GDP growth rate could lead to 

Government withdrawing stimulus – certainly beginning the phasing out over next few months

RBI tightening interest rates soon

GDP growth rate concerns

• Performance of agriculture due to poor monsoon
• Food price Inflation
• Exports (Contributing a fifth of India’s GDP)
• Fiscal deficit