Govt projects GDP growth at 5 pc, slowest in 10 yrs

Govt projects GDP growth at 5 pc, slowest in 10 yrs

Farm output may slow down to 1.8 pc

Govt projects GDP growth at 5 pc, slowest in 10 yrs

In what could be a psychological setback to the reforms process and further investment flow into key sectors, the government’s preliminary estimates on Thursday showed that India’s economy would slump to 5 per cent in 2012-13, the slowest in a decade.

Analysts and policymakers, however, were not in agreement with the projections which do not account for full-year growth numbers.

The government’s growth estimates were well below analyst expectations of 5.3-5.5 per cent, which will be a cause of concern for Finance Minister P Chidambaram, whose ministry has forecast 5.7 per cent growth in fiscal 2013. On the contrary, GDP growth, which is now at a decadal low, is estimated to have fallen below the 5 per cent mark in the second half of 2012-13, from 5.4 per cent in the first half of the fiscal.

The Central Statistical Organisation (CSO) estimates showed weak growth prospects on virtually every front -- agricultural output growth was pegged at 1.8 per cent in 2012-2013 as against 3.6 per cent in 2011-12 , while the manufacturing sector was expected to grow at just 1.9 per cent compared to 2.7 per cent last year.

"It is disappointing," said C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, and sounded optimistic about the estimates being revised upwards when the full-year data became available.

Planning Commission Deputy Chairman Montek Singh Ahluwalia too said that CSO while computing economic growth projections, has ignored the rising growth trend. "I am not certain that whether they (CSO) have done it in a correct way. In the past also, the quarterly (GDP) data was very frequently adjusted,” he said.

Causing further concern, growth in the services sector, which contributes more than 60 per cent of India’s GDP, has been hugely downgraded to 6.6 per cent from 8.2 per cent a year ago.

The trade, hotel, transport and communication sectors were projected to grow at only 5.2 per cent as against 7 per cent in 2011-12, while finance, insurance, real estate and business services sectors were pegged at 8.6 per cent, against 11.7 per cent last fiscal.
The Finance Ministry, however, said that the year would end on a better note.

"As per practice, this projection is based on extrapolation of numbers till November 2012. Since then, leading indicators have turned up, suggesting some hope that we will end the year on a better note," the ministry said in a statement on Thursday.