Govt lowers GDP growth to 6.9%

Slow progress in manufacturing and agriculture is the reason

In a clear signal that the pace of economic expansion has slowed in the second half of 2011-12, the Government, on Tuesday, cut the full year GDP growth forecast to 6.9 per cent, worst since the Lehman crisis of 2008, owing to sharp slowdown in manufacturing, mining and farm sectors.
Sluggish growth in industries is affecting economy.

A concerned Finance Minister Pranab Mukherjee said the trend is disappointing and more focus is needed on  reaching higher growth trajectory and keeping inflation at a moderate level.

 He, however, sounded optimistic of an upward revision in the growth numbers when the final figures for the financial year are out. His optimism was based on moderation in inflation numbers, the recent appreciation in rupee, strong performance of services sector and the possibility of a bumper rabi crop in the coming months. 

The latest GDP forecast for this fiscal was a tad below 7 to 7.5 per cent estimated by the government, Reserve Bank of India and policymakers, but much lower than 8.4 per cent expansion in 2010-11. Agriculture and allied activities were likely to grow at 2.5 per cent in 2011-12, compared to a robust 7 per cent growth in 2010-11, according to the Advanced Estimates released by CSO.

Manufacturing growth was also expected to drop to 3.9 per cent this fiscal from 7.6 per cent last year, construction to 4. 8 per cent compared from 8 per cent the previous year. Worst, mining and quarrying was likely to witness a decline of 2.2 per cent, compared to a growth of 5 per cent a year ago.

 But, the services sectors were estimated to grow at over 8 per cent, offsetting the slow growth rates in manufacturing, agriculture and construction sectors. Experts said, the slowdown in manufacturing was on the expected lines as investments were drying up and industrial production numbers also showed poor capital goods growth, but a few were surprised at a lower 2.5 per growth in the farm sector despite two consecutive good harvests and favourable monsoon this year.

Talking to Deccan Herald after the release of GDP growth numbers, eminent economist B B Bhattacharya said that the slowdown in farm sector can be attributed to a bumper growth in production last year. “You cannot expect similar growth in agriculture year after year,” he added.
Another indicator of economic growth, the investments toward creating assets, grew at a slower rate to Rs 26,09,963 crore in 2011-12.

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