Can India sustain 6.1% growth of last quarter?

As far as GDP growth is concerned, just as India has scored over its peers despite the slowdown, on the employment front too, India has the edge as is highlighted in today's chart of the day. While there have been talks of a recovery taking place in various countries across the globe, rising unemployment remains a serious problem. The US, in fact, expects the rate to be as high as 10% in 2009. Thus, despite stimulus packages being announced, high rates of unemployment will not be conducive in bolstering consumption which will be necessary to come out of the slump.

Data Source: The Economist

India may be an emerging superpower. But even today, seven out of every ten Indians live in villages. Although the contribution of agriculture to the country's GDP has declined from 60% to 16% in the past decade, the impact of the same on the wellbeing of Indian populace can hardly be overlooked. With the Rain Gods showing little benevolence and monsoons being 25% below average, risks to India's GDP growth have only multiplied.

The drought, poor irrigation and water harvesting facilities are unlikely to save crops facilities in the subsequent harvesting seasons as well. The country's central bank is now worried that the Rs 5.6 trillion injected into the economy through combined fiscal and monetary stimulus, accounting for 12% of GDP, will actually stoke inflationary pressures in the near future. India's's GDP did grow by 6.1% in the first quarter of the fiscal. However, the drought means that it is doubtful whether this growth can be sustained in the coming quarters.