India Forecasts Economy Growing By 8.1% In 2005/06

India's economic growth will accelerate by a faster-than-expected 8.1% in this financial year, powered by strong manufacturing and services, the Central Statistical Organization said Feb. 7. The estimate for Asia's third-largest economy was higher than last year's 7.5% growth and spurred speculation that interest rates could be tightened for a fourth time in 12 months to cap inflationary pressures.

India's booming manufacturing sector, expanding outsourcing sector and fast growing consumer class have made it the world's second fastest-growing economy after China, which logged 9.9% growth in 2005. "The second phase of development has started in India with GDP rate being ratcheted up to 7%-8% a year versus the 5.9% average of the last 10 years," said Deepak Lalwani, director of London's Astaire Research.

Late last year, Prime Minister Manmohan Singh said India should target 10% growth rate in two to three years time, calling it "eminently feasible".

Growth in the current year will be mainly powered by services, which accounts for 50% of GPD, and is forecast to grow by 11.1%. Manufacturing is another star performer with growth running at 9.4%.

Copyright Agence France-Presse, 2006

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