Indian Economy in 2009-10

Economy to grow by 7.2% in 2009-10: Govt.

February 08 2010 : The government on Monday estimated the economy to grow by 7.2 per cent in financial year 2009-10, against 6.7 per cent a year ago, despite contraction in farm production.

The projected GDP figure for the current fiscal, as put out by the advanced estimates of the Central Statistical Organisation, is lower than the Reserve Bank of India and the Finance Ministry's forecasts.

The Finance Ministry pegged GDP growth at 7.75 per cent in the mid-term economic review, while the RBI projected the economy to grow by 7.5 per cent in its quarterly monetary policy review last month.

However, the economy is likely to grow at a higher pace in the second half than seven per cent in the first half.

According to the data released today, agriculture and allied activities are, however, projected to shrink by 0.2 per cent this fiscal against 1.6 per cent a year ago.

The projected growth this fiscal is likely to be driven by 8.9 per cent expansion in the manufacturing sector against 3.2 per cent a year ago. This sector in particular had got various stimulus doses from the government in the wake of the global financial crisis.

According to the advanced estimates, mining and quarrying is likely to grow by 8.7 per cent compared with 1.6 per cent a year ago, while electricity, gas and water supply by 8.2 per cent against 3.9 per cent.

Trade, hotel, transport and communication is also projected to rise by 8.3 per cent against 7.6 per cent last year and construction by 6.5 per cent in FY'10 from 5.9 per cent in FY'09.

However, financing, insurance, real estate and business services are likely witness fall in expansion and grow by 9.9 per cent this fiscal against 10.1 per cent last fiscal and community social and personal services by 8.2 per cent compared with 13.9 per cent.

Advanced estimates are released before the end of a fiscal year to enable the government estimate various figures like fiscal deficit in the Budget.

IT, BPO exports to touch $50 billion in 2009-10

Amid signs of fast recovery from the impact of global economic slowdown, the information technology and business process outsourcing (BPO) industry would see its exports reach $50 billion in the current financial year, registering a growth of over 5 per cent. Similarly, export revenues are likely to grow at 13-15 per cent next fiscal to cross $57 billion, with the US remaining the dominant market.

In its yearly performance report, the National Association of Software and Service Companies (Nasscom) has said the domestic IT-BPO market is likely to reach Rs.66,200 crore, clocking a growth of 12 per cent, while in the next fiscal domestic revenues are likely to grow by 15-17 per cent to touch Rs.76,100-77,500 crore, particularly due to government IT spending.

The report also said the industry would continue to remain a net hirer where direct employment in Indian IT-BPO is estimated to cross 23-lakh and indirect job estimated to reach 82-lakh. “This fiscal over 90,000 new jobs will be added, while in the next fiscal this can go up to 1.5-lakh,” said Nasscom President Som Mittal.

Declining that the U.S. government’s “protectionist move” would have any major impact on the Indian IT industry, he pointed out that the industry was rapidly expanding into tier II and II cities, while 58 per cent employee workforce originate from these cites.

Significantly, before the recession, the industry was adding almost three-lakh jobs annually.

Strong performance

According to Nasscom Chairman and Genpact’s President and CEO Pramod Bhasin, “the performance of the Indian IT-BPO industry this year is far stronger than what is reflected through the growth numbers.

“The industry has reinvented itself by increasing its cost efficiencies, utilisation rates, diversification into new verticals and creating new business and pricing models, which is going to help industry in the log run and improve its margins.”

Pointing out that new areas such as engineering services, software and product development, and research and development have displayed phenomenal momentum, Mr. Bhasin said there has been a rebound in IT spending globally. “Though Europe is still a laggard, the U.S. is moving faster, while Latin America and Asia Pacific regions are expanding well. We are also looking at newer geographies to expand our base,” he added when asked about the recovery of global economy from recession.

Economic Growth verticals

Mr. Mittal said e-governance had emerged as one of the biggest growth verticals for the domestic IT-BPO sector as government IT spend was expected to reach nearly Rs.25,000 crore by 2011 from around Rs.15,000 crore in the last fiscal.

“Coming years are going to represent a significant shift in terms of business models, service lines, customers and talent structure. There will be increased focus on higher end offerings such as system integration consulting, business intelligence, knowledge services and vertical special BPO services,” he added.