Writuparna Kakati | 01 Sep, 2010
The Indian industry hailed the strong 8.5 percent GDP growth in the first quarter of the current fiscal but, at the same time, it cautioned the government against certain weak areas including a laggard financial sector, poor growth in consumption and investment, and a new wave of pessimism slowly engulfing the world economy.  

The rise in GDP growth looks "solid and not a flash in the pan", said the Federation of Indian Chambers of Commerce and Industry (FICCI) in a statement, adding, it is primarily on account of improved farm sector performance, which moved up from 0.7 percent to 2.8 percent during the period.

With the farm sector rebounding, it said, the government should now focus on the manufacturing sector and the financial services sector.

"With the cushion of a better farm sector performance later this year, the policy thrust of the government should be to energize the manufacturing sector and prop up the financial, insurance and real estate services segment that has been lagging behind", FICCI President, Rajan Bharti Mittal added.

While reacting to the fourth quarter GDP figures, another industry body, the Confederation of Indian Industries (CII), despite terming it as "very encouraging", expressed concern over the weak demand side drivers with both consumption and investment showing poor growth.  

"Among sectors, while growth in the agriculture and manufacturing sectors was strong, the growth rate in mining and construction has been modest. Growth in the services sector could have been stronger if not for the moderation in financing, real estate and business services," CII Director General, Chandrajit Banerjee viewed.

CII also warned about the "renewed pessimism" at the global market, adding the government should implement measures to encourage investment inflows and push domestic consumption by fostering a low interest rate environment.    

The PHD Chamber of Commerce and Industry, with a similar opinion, said that the economy is "firing at all cylinders" but there is no cause for complacency.

"The fundamental imbalances in the world economy have not yet disappeared despite an upturn in growth rates in the economies of US and UK. Besides, our economy has grown on the low base of last year, our agriculture performance is still moderate and industry is still not out of the woods," it cautioned.

Besides, the economy has grown on the low base of last year, agriculture performance is still moderate, industry is still not out of the woods, and growth of private consumption expenditure is below that of last year, the chamber added.

In this scenario, steps need to be taken so that growth trigger unleashed in the economy during the first quarter is maintained, said PHD Chamber President, Ashok Kajaria, adding RBI should desist from raising interest rates to quell inflation as this could adversely impact our nascent industrial recovery.

He also urged the government to focus on infrastructure and power sector reforms, disinvestment in non-strategic PSUs, better targeting of subsidies, and reforms in agriculture by addressing supply side bottlenecks especially in pulses, vegetables, dairy products.