NEW DELHI: India’s economic growth is expected to fall to a three-year low of 6.9 per cent in the current financial year, substantially down from the budgetary target of around 9 per cent and the 8.4 per cent expansion recorded in the previous year, government data showed Tuesday.
High interest rates, fragile global economic conditions and the government’s inability to push through key reforms have cramped growth.
Finance Minister Pranab Mukherjee found the data “disappointing” but said the figure would rise as business sentiments were improving and inflation was moderating.
Corporate India reacted by urging the government to take urgent steps like slashing interest rates and stabilising the fiscal balance to accelerate the growth rate.
The gross domestic product (GDP) at factor cost at constant (2004-05) prices is likely to attain a level of Rs.52,22,027 crore in 2011-12, as compared to Rs.48,85,954 crore in the previous year, according to advance estimates of national income released by the Central Statistical Organisation.
Mukherjee said the growth data was “disappointing” as it was lower than most of the estimates, including the mid-year review which has projected a 7.5 per cent growth.
“Figures of advance estimates for GDP for the current fiscal somewhat look disappointing by our recent growth experience,” he said.
However, he hoped that the data would be revised upwards on the back of recent improvement in business sentiments and moderating inflation.
“Business sentiments have started improving. Nonetheless it is an area of concern and we shall have to get more focused on reaching the higher growth trajectory at the same time keeping in mind that inflation continue to be at a moderate rate,” Mukherjee told reporters.
This year’s projected growth is the slowest since the global financial crisis of 2008-09, when the GDP growth had slumped to 6.7 per cent. Growth had rebounded to 8 per cent in 2009-10.
The Reserve Bank of India’s hawkish stance on interest rates has resulted in drying up of capital investments, adding to the country’s woes amid sluggishness in the global economy.
Gross fixed capital formation, an indicator of investments toward creating assets, grew at a slower rate to Rs.26,09,963 crore in 2011-12 as against Rs.23,31,382 crore in the previous financial year. Any weakening in this indicator signifies that the economy is slowing.
Among key sectors that slowed down in the year ending March are manufacturing, which is expected to expand by just 3.9 per cent, while mining sector will see a negative growth of 2.2 per cent.
According to the latest estimates available on the index of industrial production, the index of manufacturing registered a growth rate of 4.1 per cent during April-November of the current fiscal.
Agriculture too rose at a tardy pace of 2.5 per cent, compared to the 7 per cent growth shown in the previous fiscal.
Trade, hotels, transport and communication sectors are expected to grow by 11.2 per cent, while financing, insurance, real estate and business services could grow by 9.1 per cent.
The chairman of Prime Minister Manmohan Singh’s Economic Advisory Council, C. Rangarajan, however, said the final number for the country’s GDP growth for the fiscal year ending March is likely to be slightly higher than 7 per cent.
Planning Commission Deputy Chairman Montek Singh Ahluwalia too agreed that economic growth could be around 7 per cent once the final numbers come in.
“The 6.9 per cent is consistent with what we have been saying. We said 7 per cent for the year as whole. With 7.3 per cent in the first half and 6.9 in the third quarter, 7 per cent is possible,” said Ahluwalia.