India Estimates 8.6% Economic Growth; Inflation Worries

Devan Biswas
07 Feb, 2011
New York City

Stocks in Mumbai closed higher after the government confirmed the current fiscal year economic growth of 8.6%. The higher growth also comes with a sharp rise in current account deficit and a surge in inflation to above 8%. Cipla third quarter net declined 20%. Suzlon swung to quarterly loss.

[R]5:00 PM Mumbai – Stocks in Mumbai closed higher after the government confirmed the current fiscal year economic growth of 8.6%. The higher growth also comes with a sharp rise in current account deficit and a surge in inflation to above 8%. Cipla third quarter net declined 20%. Suzlon swung to quarterly loss.[/R]

Mumbai stocks were weak in early trading but managed to gain higher in the afternoon after the government estimated 8.6% economic growth in the current fiscal year ending in March.

The BSE Sensex rose 0.1% or 29.04 to close at 18,037.19 The CNX Nifty on the National Stock Exchange rose 0.25 to close at 5,396.00.

The rupee closed at 46.60 to a dollar.

Finance Minister Pranab Mukherjee said despite the challenges on trade balance and inflation “8.6% economic growth is quiet encouraging.” Central Statistical Organisation today released its first estimate of the GDP growth of 8.6% compared to 8% increase in the previous fiscal year.

Overall inflation is running at 8.4% and food price inflation is more than 17%. Reserve Bank of India has a target inflation rate range between 5% and 6%.

India’s economy is running close to overheating and future economic growth is likely to be curtailed unless the government shows its ability to improve food supplies and curb inflation.

BHEL and Spain based Abengoa signed an agreement to jointly develop solar power projects in India according to a report by the Press Trust. The agreement signed in Seville, Spain will allow both companies to bid for various projects in India and also develop units that may sold abroad.

Stock Movers

Cipla Limited plunged 2.9% to Rs 314.65 after the pharmaceutical company reported third quarter net profit declined 19.49% to Rs 232.69 crore.

Eicher Motors Limited rose 1% to Rs 1,081.10 after the commercial vehicle maker said fourth quarter consolidated net profit surged 169.3% to Rs 54.86 crore.

Hindustan Copper Limited rose 0.9% to Rs 265.90 after the refined copper maker reported third quarter net profit soared 69.5% to Rs 80.72 crore.

Nagarjuna Construction Company Limited slipped 3.6% to Rs 100.35 after the construction company said third quarter consolidated net profit fell 6.6% Rs 52.11 crore.

Piramal Life Sciences Limited slumped 1.3% to Rs 92.70 after the biopharmaceutical company reported third quarter net loss reduced to Rs 25.68 crore compared to Rs 36.76 crore from a year ago.

Suzlon Energy Limited gained 3.5% to Rs 49.70 after the wind power company reported third quarter consolidated net loss of Rs 253.57 crore compared to net profit of Rs 14.10 crore from same period a year ago.