India's economy picked up pace in the latest quarter as government spending helped to overcome the worst of the global downturn but drought threatens to stall the recovery. Growth in gross domestic product accelerated to 6.1 percent from a year earlier in the April-June quarter from 5.8 percent in the previous quarter, the government's Central Statistical Organization said Monday. The uptick signals that the worst effects of the global financial crisis may have passed for Asia's third-largest economy. India's relatively low dependence on exports meant that it weathered the global economic storm better than many countries. Yet economists and policy makers now worry that the domestic engine of the economy is under threat from weak rains, which could dent the recovery and trigger food price inflation. “The worst in terms of the external-led downturn is over,” Sherman Chan, an economist at Moody's Economy.com said by phone from Sydney. “What is more of a threat now is domestic concerns, coming from the drought.” She worries that the drought will have knock on effects through the economy over the next half year, as declining agricultural output reduces demand for transportation and storage, hits both exports and domestic trade, and reduces incomes for hundreds of millions of Indians who rely on farming for their livelihoods.
