Economy set to grow by 8.6 pc in 2010-11; inflation a concern

New Delhi, Feb 7 (PTI) A high farm output on top ofabundant rainfall has helped the Indian economy grow by anestimated 8.6 per cent in 2010-11, against 8 per cent a yearago, but high inflation remains a dampener.

According to Advance Estimates released by thegovernment, the Indian economy would grow by 8.6 per cent inthis financial year, despite fragile global recovery sincefinancial meltdown of 2008.

"All along I was maintaining, it should be around 8.5 percent plus. 8.6 per cent is accepted," Finance Minister PranabMukherjee said adding, "Now the other issue is inflation,trade balance... these are to be addressed".

Agriculture and allied activities are expected to grow at5.4 per cent in 2010-11 compared to just 0.4 per cent in theprevious financial year.

The 8.6 per cent GDP growth prospects, however could notcheer markets. The BSE benchmark sensex closed almost flat at18037.19 on concerns of inflation and rising interest rates.

The CSO''s GDP growth projection is a shade higher thanthe forecasts of 8.5 per cent made by the Reserve Bank ofIndia and the Finance Minister Pranab Mukherjee earlier.

While services such as trade, hotel, transport andcommunications improved to 11 per cent from 9.7 per cent, themanufacturing remains static at 8.8 per cent year on year.

Mining and quarrying is likely to grow by 6.2 per cent,compared to 6.9 per cent a year ago, while electricity, gasand water production will grow up by 5.1 per cent, as against6.4 per cent in the previous fiscal.

With over dependence on monsoon, the country''sagricultural growth continues to fluctuate year-on-yeardepending on the weather gods.

Mukherjee said the economic growth estimated wassatisfactory in the wake of the rising inflation and tradeimbalances.

The overall inflation has remained above the comfortzone of 5-6 per cent for over a year now.

In December, inflation shot up to 8.43 per cent, from7.48 per cent in the previous month. Food inflation for theweek ended January 22 stood at 17.05 per cent.

However, Chief Economic Adviser Kaushik Basu whileadmitting inflation was a concern, said it would not affectthe growth story.

"And the target of 9 per cent economic expansion for thenext financial year is well with in the reach," he added.

"The prospects for the world as a whole are looking betterbut still there are uncertain clouds. In that scenario growthof 8.6 per cent is absolutely remarkable. So the 9 per centwhich we are aiming for next year is now looking well withintarget," Basu said.

Earlier, the GDP estimate for 2009-10 was revised upwardto 8 per cent from 7.4 per cent. .