India economic growth rate for 2012-13 will slump to 5%: government
This estimate by CSO is drastically lower than what has been projected thus far by the government and RBI.
"The growth in GDP (Gross Domestic Product) during 2012-13 is estimated at 5 per cent as compared to a growth rate of 6.2 per cent in 2011-12," according to the Advanced Estimates released today by the Central Statistical Organisation (CSO).
In 2002-03, the GDP had grown at 4 per cent. Since then the Indian economy has been expanding at over 6 per cent, the highest rate being 9.6 per cent in 2006-07.
CSO's advance estimate lowered the growth in agriculture and allied activities to 1.8 per cent in 2012-13, compared to 3.6 per cent 2011-12.
Manufacturing growth is also expected to drop to 1.9 per cent in this fiscal, from 2.7 per cent last year.
The CSO's GDP growth projection is a lower than the 5.5 per cent forecast made by the Reserve Bank in its quarterly monetary policy review last week.
In its mid-year Economic Review, the government had also estimated growth ranging from 5.7-5.9 per cent. The current estimate is a sharply lower than the 7.6 per cent growth projection for 2012-13 made by government in Budget.
The latest estimate of 5 per cent 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 per cent.
According to the advance estimates, the 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.
However the growth in the mining and quarrying is likely be slightly better at 0.4 per cent, compared to contraction of growth of 0.6 per cent a year ago.
Growth in construction is also likely to be 5.9 per cent in 2012-13, against 5.6 per cent last year.
According to the CSO's advance estimates, growth in electricity, gas and water production is likely to decline to 4.9 per cent in 2012-13, from 6.5 per cent in 2011-12.
During the current fiscal, the trade, hotel, transport and communication sectors are projected to grow by 5.2 per cent, as against 7 per cent last fiscal.
Community social and personal services growth however would be slightly better at 6.8 per cent, compared to 6 per cent in previous fiscal.
Overall, the 5 per cent growth in the advanced estimates is lower than what experts have been forecasting.
Yesterday, the International Monetary Fund (IMF) had said that the Indian economy would grow by 5.4 per cent in 2012-13, but should pick up to six per cent in next fiscal.
The Indian economy had expanded by 8.4 per cent in both 2010-11 and 2009-10, while growth in 2008-09 was 6.7 per cent.
The advance GDP estimates are released by the CSO before the end of a financial year to enable the government to formulate various estimates for inclusion in the Budget.
The latest estimate is the worst of all growth projections issued by the government and the central bank.
SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI:
"The imputed growth for second half FY13 is at 4.7 percent. In our opinion, it is likely to be revised upward.
The main reasons for this considerable slowdown is a sharp correction in services at 6.6 per cent, led by trade and finance. The base effect in Q4 is positive, despite which, the numbers are projected lower which implies sharp sequential worsening of economic activity.
We have been anticipating marginal improvement in Q4 on the back of a small pick up in investments."
UPASNA BHARDWAJ, ECONOMIST, ING VYSYA BANK, MUMBAI
"While the slowdown in overall GDP estimates have been widely expected, the slowdown in services, particularly the trade, hotels, transport, communication category has been sharper than anticipated.
Moreover, the sharp slowdown clearly points towards continued slack in consumption demand, which is expected to keep the core inflation under check going forward".
PHANI SEKHAR, FUND MANAGER, ANGEL BROKING, MUMBAI
"It might have small impact but would not impact much as this fiscal year is almost over. People are focusing on next fiscal year.
It'll be interesting to see when actual data comes if there is any structural driver that is lowering GDP numbers and whether rate cuts can prevent that."
A. PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP LTD, MUMBAI
"The estimate seems to be on the lower side. It is surprising that construction sector is estimated to slow sharply in the second half. There is some concern that the drastic slowdown in government spending could affect October-March GDP data.
Even then, I expect this advance estimate to be revised upwards. I think we will end up closer to RBI's estimate of 5.5 percent."
DARIUSZ KOWALCZYK, SENIOR ANALYST, CREDIT AGRICOLE, HONG KONG
"India says FY13 GDP may rise 5 percent, well below the 5.5 percent consensus - this is negative for INR and overall sentiment in India. It may well push the INR OIS and bond yield curves down. Yesterday we closed our long INR position at a 4 percent profit and are waiting for some weakening before re-entering."
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI
"5 percent GDP growth for the full year is more in tune with reality. The industrial sector downturn has extended beyond anyone's expectation. In the first eight months of the year, for almost six months the manufacturing output has been negative.
Exports have been continuously declining, non-food credit growth is slowing while agricultural sector performance has also been sub-optimal.
After the government started showing a firm resolve to put things in place in mid-September, the series of data that has been released is also reflecting sustained deterioration across various growth indicators."