NEW DELHI: India’s economy grew at its fastest quarterly pace in at least seven years in the last quarter of 2003 as record farm production and the cheapest borrowing costs in three decades spurred consumers to buy cars and homes.
Gross domestic product expanded 10.4 percent in the quarter that ended Dec. 31 from a year earlier, the Central Statistical Organization said. It was the highest growth rate since India began quarterly records in April 1997 and was up from 8.4 percent in the
The rapid pace of growth may help Prime Minister Atal Bihari Vajpayee’s ruling coalition win a new mandate in general elections in April and May.
Vajpayee is proposing to speed up the sale of state assets, to lower subsidies on fuel and food and to increase investment in infrastructure to spur growth.
“The growth number could not have come at a better time for the ruling coalition,” said R.K. Gupta, a manager at CreditCapital Asset Management. “The economy is soaring and that will mean better company results.”
Record crop production fueled by the heaviest monsoon rains in five years has raised incomes among the 70 percent of Indians who live in the countryside, encouraging them to spend more on everything from tractors and cars to washing machines.
“Monsoon rains played a huge role in farm growth,” said Anand Mahindra, managing director at Mahindra Mahindra, India’s biggest tractor maker, which tripled its profit in the quarter. Economic growth may be sustained because “there is a lag between good farm
output and consumption.”
Indian stocks rose on optimism faster growth would lift profits. The Mumbai stock exchange’s Sensitive index rose 1.27 percent to 5,590. The rupee rose on speculation that the central bank would let the currency rise to curb inflation.
Growth is also being spurred by the cheapest borrowing costs in a generation. The central bank has held its key rate for loans to commercial banks at a 31-year low of 6 percent since April 2003, and analysts expect no change when policy makers meet next.
Agricultural production surged 17 percent in the last quarter of 2003, the fastest on record.
Manufacturing expanded 7.4 percent, up from growth of 7.3 percent and the most in three years.
“Agriculture is the engine of growth,” said B.V.R. Subbu, president of Hyundai Motor India, the local unit of South Korea’s biggest automaker. That has led to a “a huge burst of purchasing power in rural India.” Hyundai India says it plans to spend $220 million
next year to double capacity in India.
An index covering trading, hotels, transport and communications companies grew 13 percent, the fastest rate on record. Financial services providers, insurers, real estate and business services companies grew 7.7 percent. Services now account for more than half
of the economy.
The economy may have expanded 8.1 percent in the year to March 31, the most in 15 years, the government said last month.