Scams notwithstanding, India heads for 9% growth in 2011

India was tarred by a string of corruption episodes - irregularities in the holding of CWG and leakage of tapes pointing to lobbying to fix ministerial berths to cite a few-- but its $1 trillion economy managed to sidestep the controversies in 2010 and appeared on course to a nine per cent growth this fiscal

The year saw reform legislations stuck in the logjam between the government and the opposition over constitution of a joint parliamentary committee to look into the Rs1.76 lakh crore second-generation mobile telephony spectrum scam.

This was over allocation of mobile telephone radio frequency at throwaway prices, which may cast its shadow over long term growth process.

Uncertain winds from outside, coupled with domestic challenges in the form of corruption issues, snowballed into a major credibility crisis for the nation, which at one point also faced a cash crunch that threatened to hit investments that are key to growth.

Towards the end, rising onion prices emerged as another challenge that along with expensive tomato and garlic catapulted food inflation to double digits, though quick-fire measures brought the prices of the edible kitchen bulb to bearable levels.

A year after the 2008 global financial crisis, India’s exports picked up on return of demand from the West and the government is hoping that outbound shipments would touch USD 200 billion this fiscal against USD 179 billion in the previous year.

But the headwinds emerging in the form of a possible contagion from the sovereign debt crisis in a few countries of Europe does not bode well for the exports sector and the overall Indian economy.

Europe accounts for 36% of India's exports.

Although exports account for less than a quarter of India’s GDP and notwithstanding the fact that the economy is mainly domestic consumption driven, a fall in demand in the West has implications for the manufacturing sector.

Among the other areas, infrastructure remains a major problem for India, particularly power generation.

The Mid-Year Analysis, tabled by finance minister Pranab Mukherjee in Parliament, said, “The very rapid 8.9% growth in GDP recorded in the first half of 2010-11 raises the possibilities of a faster recovery to the pre-crisis level...It is estimated that growth in 2010-11 will be 8.75% with variation of 0.35 per cent on either side."

It said the growth in the current fiscal is broad-based, which portends well for a stronger than estimated economic prospect.

The government was earlier expecting growth in the range of 8.5% plus or minus 0.25%.