The Central Statistics Office in India revealed yesterday (30 August 2011) that it estimated Gross Domestic Product (GDP) for the second quarter of 2011 (first quarter of the 2011/12 financial year) to have expanded by 7.7% over the previous quarter. The main growth drivers were services sectors and manufacturing, which grew at 13.2% and 7.2% respectively, and together contributed 6.3% of total growth. Very disappointing was construction, which grew at 1.2%, and mining at 1.8%.
Activity in Indian services has shown sustained expansion over the 26 months to June, as reflected in the HSBC Services Index. This trend promises to continue as the rate of growth accelerated from June to July to a three-month high and was in line with the long-run series average. Panelists of the HSBC services Index recorded a higher level of activity in July 2011 compared to the previous survey period, attributing this to a rise in new business volumes, with telecoms showing the highest activity. Indian service providers were optimistic in July 2011 that activity would rise over the next twelve months.
Although India’s growth is slower than last year, it is above world average, and second quarter growth of 7.7% is above the expected 7.6%.
China showed a similar pattern when it exceeded expectations, and GDP rose by 9.5% percent for the second quarter of 2011, above the Bloomberg median estimate of 9.3%. Much of the growth was added by secondary industries (up 11.0%) and the tertiary (up 9.2%).
China and India are now the main drivers of global economic growth, together constituting over 40% of global growth.
There are more apparent signs of a divergence in growth between emerging countries and developed ones. Further, these countries are still in a position, although limited, to stimulate growth through fiscal policy should growth in the developed world continue to soften. India is also showing some signs that inflationary pressures may be easing, which may open some space for monetary maneuvering.
Xhanti Payi
Assistant Economist
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