The government on Tuesday estimated 6.9 per cent economic growth for the current financial year. Earlier predictions had ranged 7-7.5 per cent. The economy had grown 8.4 per cent last financial year.
At the time of preparing the Budget estimates, the government had said it wanted to take the economy back to the nine per cent growth level seen before the 2008-09 economic crisis. But, the advance estimates released on Tuesday show crucial sectors such as manufacturing, mining, construction and a section of services growing even less than during the crisis period.
The advance estimates, to be used for Budget computations, peg economic growth at a three-year low of 6.9 per cent this financial year. In 2008-09, the growth was a bit lower, at 6.7 per cent.
Manufacturing, on which the government is pinning hopes of providing greater employment in the long run, is estimated to grow just 3.9 per cent against 4.3 per cent in the crisis period. Mining and quarrying will contract this year by 2.2 per cent, which was not the case even in 2008-09. Construction growth is estimated to be down to 4.8 per cent, whereas it stood at 5.3 per cent in the crisis period.(Click here for table & graph)
Services like financing, insurance, real estate, and business, community, social and personal services also estimated to expand less than during the crisis period.
Deloitte, Haskins & Sells Director Anis Chakravarty said the central bank’s monetary tightening spree could not be blamed for subdued growth, as high inflation had to be dealt with.
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Though the finance ministry exuded confidence that the final growth numbers would be somewhat better, the falling rate of gross fixed capital formation and private consumption expenditure do not augur well for economic expansion even next year.
A slight upward revision for economic growth this year is expected. Only the first advance estimates of agriculture production in the rabi season were taken even as the second advance estimates were available. The first estimates pegged food grain production at 245 million tonnes, while the second projected it at 251 million tonnes. “I anticipate an upward revision in GDP growth numbers when the full data for 2011-12 become available,” Finance Minister Pranab Mukherjee said.
Chief Statistician T C A Anant said the data would be reassessed after actual figures. Prime Minister’s Economic Advisory Council Chairman C Rangarajan pegged the final number to go up to 7.2 per cent, while principal adviser in the Planning Commission Pronab Sen projected it around 7.4 per cent.
Citi India economist Rohini Malkani said, “Growth at sub-seven per cent? Yes, but there are signs of bottoming out. Both consumption and investment have seen a sharp deceleration on an annual basis, but the deceleration appears to have troughed. We maintain our view of FY13 growth at seven per cent.” Nomura’s Sonal Varma said she expected real GDP growth to rise to 7.4 per cent y-o-y in FY13.