FY13 GDP growth slows to decade low of 5%; fiscal deficit improves

Pulled down by poor performance of farm, manufacturing and mining sectors, economic growth slowed to 4.8 percent in the January-March quarter.

New Delhi: Reflecting subdued economic sentiments, the growth slipped to decade's low of 5 percent in 2012-13, though improvement in fiscal deficit figures provided some relief to the government, which is battling slowdown.

The fiscal deficit was 4.89 percent of GDP in 2012-13, better than the Budget Estimate of 5.2 percent on the back of higher revenue collection and savings in expenditure.

Even as the fiscal deficit has shown improvement over the government estimates, the GDP numbers released today showed the country's economic growth slowed to 5 percent, from 6.2 percent in 2010-11.

Reacting to the economic numbers and RBI's caution on inflation, the BSE index Sensex slumped by 455 points -- the biggest single-day drop in 15 months.

Prime Minister Manmohan Singh expressed hope that in the coming months inflation will come under greater control and provide more space to RBI to pursue pro-growth policies.

Finance Minister P Chidambaram said the growth numbers are as per the expectations and the government will focus on increasing revenue collection to restrict fiscal deficit to below 4.8 per cent in the current financial year.

Meanwhile, the data on eight key infrastructure industries revealed that their growth slowed to 2.3 percent in April, as against 5.7 percent in the year-ago period, mainly due to contraction in crude oil, natural gas and fertiliser output.

As per the data released by the Controller General of Accounts, the fiscal deficit was Rs 4.89 lakh crore, or 4.89 percent of the GDP, in the last fiscal.

In the Budget, the government had pegged the fiscal deficit -- the gap between expenditure and revenue -- at Rs 5.20 lakh crore or 5.2 percent of GDP for 2012-13.

The fiscal deficit in April this year was 17.3 percent of the Budget Estimates.

Reacting to the fiscal deficit numbers, Chidambaram said in the current fiscal the government would stress on raising revenue collection and not on cutting down expenditure to further improve its financial position.

"I don't wish to compress expenditure, therefore revenues have to go up... For 2013-14, (we) have to do much better than 4.8 percent," he said.

Net tax receipts were Rs 7.41 lakh crore and total expenditure was Rs 14.09 lakh crore during 2012-13 fiscal.

Revenue deficit came down to 3.6 percent of GDP in 2012-13, against 3.9 percent estimated earlier.

Value of rupee, another key economic indicator, slumped to 11-month low of 56.50 against US dollar.

The GDP data released earlier today showed, economic growth rate slumped in 2012-13 on account of poor performance of farm, manufacturing and mining sectors, raising hopes for rate cut by Reserve Bank to boost economy.

RBI is scheduled to announce its mid-quarterly policy on June 17.

The GDP growth in the current fiscal is projected to improve to 6.1-6.7 percent.

Analysts said the better than expected fiscal deficit numbers would help reduce the rating downgrade threat by global agencies like Standard & Poor's and Moody's.