The government on Friday revised the annual economic growth for last fiscal to 4.5% from 5% earlier after industrial and farm sectors expanded at a lower-than-estimated pace.
Analysts said the downward revision provides a favourable base for the calculation of the gross domestic product (GDP) for 2013-14. However, the growth rate for this fiscal may still remain below 5% if the 0.2% drop in industrial production in the April-November period is any indication, they added. The ministry of statistics and programme implementation also revised up the 2011-12 annual GDP expansion pace to 6.7% from 6.2%, which also enhanced the base for the calculation of the 2012-13 GDP.
The latest downward revision was proof that efforts to revive investments by fast-tracking the approvals for big infrastructure projects didn't quite help revive the sentiments last fiscal. Aggregate demand in the economy stayed subdued and growth in all its components – government, private consumption and investments – trailed the previous year's data.
Domestic savings grew 7.8% last fiscal, compared to 7.7% last year. At 30.1% of the GDP, gross domestic savings ratio at current prices dropped from 31.3% in 2011-12 as inflation remained elevated and even consumption inched up marginally. Household savings dropped to 21.9% of the GDP last fiscal from 22.8% in the previous year, partly because people invested in gold, while private corporate savings at 7.1% of the GDP, compared to 7.3% a year before reflecting reduced profitability.
The growth of 7.4% in the gross fixed capital formation (GFCF)--a gauge for fixed investment--in current price last fiscal was much lower than that of 18.9% a year before.
Investment climate was hurt last fiscal by the absence of of speedy clearances of projects along with other policy constaints in an environment of high borrowing costs, said Madan Sabnavis, chief economist at CARE Ratings.
The growth in the primary sectors, which includes agriculture, forestry, fishing, mining and quarrying, was revised down to 1% from 1.6% on the basis of latest production data, the Central Statistics Office said. With utilities sectors faring badly, key inputs had remained expensive and in short supply, signaling a bad omen for the economy.
Similarly, the growth in the secondary sectors (manufacturing, electricity, gas and water supply, and construction) was trimmed to 1.2% from 2.3% reported in May last year, while the expansion of the tertiary sector (all services) rem,ained flat at 7% from 7.1% reported earlier.