Growth rate likely to moderate this fiscal: Economists

Leading economists expect the country's gross domestic product (GDP) growth rate in fiscal 2007-08 to moderate over the previous year on account of the recent signs of deceleration in industrial production. However, they maintain that the GDP growth rate in 2006-07 will be more or less in line with the 9.2 per cent advance estimate.

"It seems the index of industrial production is overstating industrial growth for the last quarter of 2006-07. When you look at the micro numbers in the data, components like auto, cement, railway freight and construction are performing badly. I apprehend a significant slowdown in the industrial sector by the middle of the year. My projection for GDP growth in the current fiscal is around 7.8 per cent," said Abheek Barua, chief economist, ABN Amro.

Barua added that GDP growth in 2006-07 would be a tad lower than the 9.2 per cent advance estimate.

Though industrial production seems robust when viewed on a year-on-year basis, production growth has been decelerating since November 2006. From a high of 15.82 per cent in that month, the index went down to 11 per cent in February 2007. For the 11 months till February, the industrial production growth rate stood at 11.1 per cent, as compared to 8.2 per cent in 2005-06.

"GDP growth should be close to the advance estimate of 9.2 per cent," said Vivek Bharti, economist, Ficci. "Given the robust performance of the manufacturing sector, which is the key to the growth of the economy, and expectations of an improved harvest, the results should be better."

"I expect that the advance estimate of 9.2 per cent for 2006-07 will be achieved as only data for one-month (March) remains to be declared," said Rajiv Kumar, director and chief executive, ICRIER.

Economists agree that a slowdown in industrial production is likely in the current fiscal. "When you look at the month-on-month data, industrial production is headed southward, as capacity constraints have emerged even as demand is softening," Kumar added.