The Indian economy has positively surprised all the economists and analysts by growing at 8.9% in the first quarter (Q1FY07) of this fiscal against the 8.5% growth in the gross domestic product (GDP) during the same period last fiscal. Even the best estimates before the actual numbers came out were suggesting that the growth rate might remain at the previous level. Although the previous quarter (Q4FY06) ended March 2006 had shown 9.3% growth, economists were expecting the number to be up to 8.5% only or even slightly lower.

Economists were expecting the agriculture sector to perform not so well in this quarter, as it slipped to 3.4% growth compared to the 5.5% growth in the previous quarter. The strong performance from services and manufacturing, however, kept the overall economy on the right track.

The services sector, which contributes more than half of India’s GDP, grew 13.2% in the first quarter. Manufacturing sector also significantly contributed to the overall GDP growth rate. It grew by 11.3% while construction sector registered 9.5% growth, according to the figures released by India's Central Statistical Organisation, responsible for compilation of the Index of Industrial Production (IIP). Trade, hotels, transport and communications sector have grown by 13.2%. Financing, insurance, real estate and business services sector registered a growth of 8.9%.

India has improved its position in the global competitiveness ranking by moving up two places to the 43rd rank on the Geneva-based foundation World Economic Forum's list of most competitive economies. India has surpassed countries such as China, South Africa, Vietnam and Brazil in the list of 125 countries, which is based on various factors affecting a nation's business environment and economic development.

The quality of scientific research and the number of scientists and engineers the country produces played a crucial role in this improvement in the ranking. India's overall rank of 43 demonstrated remarkably high scores in the "capacity for innovation and sophistication of firm operations,” highlighted the WEF’s Global Competitiveness Report '06.

Among the other lists released in the same report, India has been placed at 27th in the Business Competitiveness Index, 27th for the quality of national business environment ranking and 25th in the company operations and strategy ranking. The WEF report has, however, found India’s health and education sectors insufficient. It has also criticised the successive Indian governments for failure in reducing the public sector deficit.

Switzerland has emerged as the world's most competitive economy followed by Finland and Sweden, while the previous top ranked country the U.S. has dropped to the sixth position.

Among the BRICs countries (Brazil, Russia, India and China), India has emerged as the leader, according the WEF’s Global Competitiveness Report '06. India at 43rd rank in the list is well ahead of China at 54, Russia at 62 and Brazil at 66.