Growth pangs: Q1 GDP numbers likely to reaffirm slowing trend

Aug 31 2012, 11:03 IST
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SummaryIndustry performs poorly but farm sector output may cushion overall growth

Despite a lull in industrial production and weakening export markets, the Indian economy is estimated to have maintained the last quarter’s growth of 5.3 per cent. This has given hope to policymakers desperately trying to rev up the country’s growth momentum.

“Industry has performed poorly but farm sector is likely to give some cushion taking the overall GDP growth to about 5.2 to 5.4 per cent,” said a person familiar with the development.

The first quarter (April to June) GDP data for 2012-13 are scheduled to be released on Friday by the Central Statistics Office. Anticipation of weak growth numbers have already spooked investors who are worried that the economy may have fared worse than the fourth quarter of last fiscal when it touched a nine-year low.

From January to March 2011-12, the GDP grew at a mere 5.3 per cent with manufacturing dipping by 0.3 per cent. While agriculture registered a growth of 1.7 per cent, financing, insurance, real estate and business services grew by 10 per cent. “Industrial production slumped in the second half of last fiscal and the trend is likely to continue for some more months. Government measures could have an effect post October from when we could see better growth,” he said.

Factory output dipped by 1.8 per cent in June. Led by high interest rates and dampened demand, the Index of Industrial Production shrunk by 0.1 per cent in the first quarter of the fiscal.

In recent weeks, a host of research agencies and analysts pegged Q1 GDP growth at sub-6 per cent level. “We expect first quarter GDP growth at 5.2 per cent. Roughly the same levels as the fourth quarter of last fiscal. With a record food production, agriculture will prove to give solace with a growth of 2.3 per cent, while industrial growth is likely at 3.1 per cent. Service sector growth may have slowed to 6.9 per cent,” said Sunil Sinha, director and principal economist at Crisil

Earlier this week, Moody’s Analytics pegged April- June growth at 5.2 per cent, cautioning that downside risks to growth continue and could even lead to a 5 per cent GDP growth.

Hoping for a rebound in industrial production, the PM’s Economic Advisory Council in Economic Outlook for 2012-13 had pegged GDP growth at 6.7 per cent, a tad higher than the 6.5 per cent in the last fiscal.

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