News: Chidambaram says Indian Q2 GDP growth over 8 pct yr/yr

(RTR 07/10/2006) New Delhi - India's economy, Asia's fourth largest, expanded more than 8 percent in the July-September quarter from a year earlier, Finance Minister Palaniappan Chidambaram said on Saturday.

But the prime minister said growth of 10 percent was needed to make a real dent in poverty in India, and billions needed to be spent on airports, ports and highways.

GDP in the April-June quarter grew 8.9 percent from a year earlier, beating estimates, as demand for everything from phones to cars in billion-plus India surged due to falling prices, rising disposable incomes and attractive financing schemes.

"I am happy to inform you that second-quarter GDP has also recorded a growth of over 8 percent," Chidambaram told a seminar on infrastructure. India's fiscal year runs from April to March.

Expansion has come mainly on scorching growth in the services and manufacturing sectors over the past several quarters, overshadowing the growth in agriculture.

The surging growth has forced the central bank to raise its interest rates three times this year to cool the economy and check inflation. The central bank is due to review rates again later this month.

Prime Minister Manmohan Singh told the seminar the pace of growth needed to be raised further if enough jobs were to be created to pull millions out of poverty.

Improving infrastructure was the key to boost growth and remove bottlenecks, Singh said outlining the need to invest heavily in ports, roads and airports.

"A growth rate in the vicinity of 10 percent is not impossible to achieve," said Singh, who liberalised the economy when he was finance minister in the 1990s.

"We will need to run hard just to stay where we are. Maintaining a growth rate of 8 percent would need a continual improvement in our policy regime. To raise it further, would require sustained effort to boost our agriculture and manufacturing growth."

Singh said he anticipated investments of 2.2 trillion Indian rupees ($48.5 billion) by 2012 in the upgrading of highways.

"On the issue of foreign direct investments, as a safe rule we can expect 2 percent of GDP as inflows. It is within the limits of prudence and key for balance of payments (to be) in good shape."