'GDP encounraging, but govt has to foster demand'

Written by: Samyuktha
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New Delhi, Aug 31: While the impressive 8.8 per cent economic growth in the first quarter of 2010-11 is encouraging, India still has to work on the fostering domestic demand and investment inflows, noted the Confederation of Indian Industry (CII).

"Strong GDP growth seen in the first quarter of 2010-11 is very encouraging and maintains India"s position as the second fastest growing economy in the world after China. CII is confident that the economy will grow at 8.5 per cent for the full year," said Chandrajit Banerjee, DG, CII.

"While the headline number is encouraging, there are some areas of concern revealed by the underlying data. The demand side drivers of GDP seem weak 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," the apex industry body noted in a statement.

It also observed that the growth in the services sector could have been stronger if not for the moderation in financing, real estate and business services.

Drawing attention to the extent of the economy's dependence on domestic demand, CII recommended implementation of measures to improve the business environment so that investment inflows continue to remain strong. Domestic consumption also needs to be encouraged by fostering a low interest rate environment.

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