Second Quarter Growth drivers

• An analysis of the recent CSO data will help in understanding the current growth drivers. In the second quarter of 2010-11, industry and services have performed according to expectations, expanding by 9 per cent and 9.6 per cent, respectively.
• The big surprise was in agriculture (4.4 per cent). Good monsoons have boosted the kharif crop. The situation was different a year ago when successive draughts and floods hampered the farm sector. The performance of this sector is closely watched because its indifferent performance can pull down the overall growth. Though accounting for a small proportion of the GDP, it employs the maximum number of people.A revival here will boost rural demand and most importantly it will have a direct bearing on inflation and inflation expectations.
• However, manufacturing, which has recently been the star performer in the industry segment, has caused some concern despite its fairly impressive showing (9.81 per cent) in the July-September quarter. Although its growth is higher than last year's 8.36 per cent, it is sharply lower than the 13 per cent growth it clocked in the first quarter of the (current) year. It is likely that the quarter-on-quarter fall is due to declining investments, a point also corroborated by other parameters such as a fall in credit offtake from banks. The services sector's growth has been driven by the strong showing of trade, hotels, transport and communications.
• The sub-segment — community services, social and personal services — which is seen as a proxy for government spending has fared well although it can no longer count on the stimulus measures.