Govt cuts GDP growth estimate for 2012-13 to 5%; lowest in 10 years

The government had last month revised downward the economic growth for fiscal 2011-12 to 6.2 percent from the earlier estimate of 6.5 percent.

New Delhi: Belying hopes of recovery, India's economic growth rate is estimated to slip to a decade's low of 5 percent in 2012-13, pulled down by poor performance of manufacturing, agriculture and services sectors.

Releasing the first official estimate of growth for the current financial year, the Central Statistical Organisation (CSO) said it would decline from 6.2 percent in 2011-12 to 5 percent, much lower than the projections of the Reserve Bank and other agencies.

Noting that the growth estimates, which are based on data for April-November, were below expectations, Finance Ministry said that it will continue efforts to revive economic growth and hoped that final figures would show better results.

"Since then, leading indicators have turned up, suggesting some hope that we will end the year on a better note. Also, sectors such as trade and transport, which are related to industry, would also tend to get revised upwards, if growth outcomes are better," the ministry said in a statement.

It further added: "We are keeping a watch on the situation. We have taken and will continue to take appropriate measures to revive growth."

Describing the growth numbers as astonishingly low, India Inc demanded that the government and the Reserve Bank should take all possible measures to arrest declining growth.

The previous low at 4 percent was recorded in 2002-03. Since then the Indian economy has been expanding at over 6 percent, the highest rate being 9.6 percent in 2006-07.

CSO's advance estimate lowered the growth in agriculture and allied activities to 1.8 percent in 2012-13, compared to 3.6 percent 2011-12. Manufacturing growth is also expected to drop to 1.9 percent in this fiscal, from 2.7 percent last year.

While the Reserve Bank has projected growth rate of 5.5 percent for the current financial year, the International Monetary Fund (IMF) has pegged it at 5.4 percent.

The Finance Ministry had earlier reduced the growth projection for the current fiscal to 5.7-5.9 percent from the original estimate of 7.6 percent.

With a view to promoting growth, the RBI in its quarterly policy review last month lowered the key lending rate by 0.25 percent and reduced the Cash Reserve Ratio (CRR) by the same margin, releasing Rs 18,000 crore or primary liquidity into the system.

When asked about the possibility of further lowering of interest rate to boost growth, RBI Governor D Subbarao, who is in Guwahati for board meeting, said: "We got to know about the CSO projection. We will take that into account as and when we make our next policy... I am unable to comment on rate cuts at this forum".

The latest estimate of 5 percent for the entire fiscal means that the pace of economic expansion has slowed sharply in the second half of 2012-13, given that GDP growth in the April-September period stood at 5.4 percent.

This estimation, however, has been objected by Planning Commission Deputy Chairman Montek Singh Ahluwalia who said: "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."

According to Ahluwalia, the CSO ignored the uptrend in growth towards the second half of the fiscal while computing the data for the whole financial year.

The data suggests that services sector including finance, insurance, real estate and business services sectors are likely to grow by 8.6 per cent this fiscal, against 11.7 per cent last fiscal.

On the positive side, mining and quarrying is likely be slightly better at 0.4 percent, compared to contraction of growth of 0.6 per cent a year ago. Growth in construction is also likely to be 5.9 percent in 2012-13, against 5.6 percent last year.