India's GDP likely to hit lowest growth in three years

Agriculture and allied activities are likely to grow at 2.5 percent in 2011-12, compared to a robust growth of 7 percent in 2010-11, according to the advanced estimates released on Tuesday by the Central Statistical Organisation (CSO).

Commenting on the development, the Union Finance Minister Pranab Mukherjee said that the main reason for the decline is slowdown in industrial growth, in particular investment growth. “The negative growth in the mining sector along with slowdown in construction has also contributed to the decline in GDP growth,” he said.

“Though figures of advance estimates for GDP for the current fiscal somewhat look disappointing by our recent growth experience, yet considering the current global context and the slowdown in the domestic industrial sector in particular, the growth performance is not all that surprising,” he added.

Mukherjee said there have been some encouraging signs in the recent weeks on business sentiments, improvement in rupee exchange rate, moderation in headline inflation, possibility of a bumper rabi crop, and continued strong performance of the service sector which should help in recovering the growth momentum. The finance minister said he anticipates an upward revision in the GDP growth numbers when the full data for year 2011-12 becomes available.

The CSO data said manufacturing growth is also expected to drop down to 3.9 percent in this fiscal from 7.6 percent last year. The CSO's gross domestic product (GDP) growth projection is a tad lower than the seven percent forecast made by the Reserve Bank of India in its quarterly monetary policy review last month.

The latest GDP growth estimate of 6.9 percent for the entire fiscal year means that the pace of economic expansion slowed in the second half of 2011-12, given that the GDP growth in April-September 2011 period stood at 7.3 percent.

According to the advance estimates, mining and quarrying is likely to witness a decline of 2.2 percent, compared to a growth of 5 percent a year ago. Growth in construction is also likely to slip to 4.8 percent in 2011-12, against an 8 percent jump in 2010-11. The finance, insurance, real estate and business services sectors are likely to grow by 9.1 percent this fiscal, against 10.4 percent last fiscal.

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