Shocker: India's economic growth rate for 2012-13 to plunge to 5%, says govt

Feb 07 2013, 21:49 IST
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India's 2012-13 GDP growth estimated at 5.0%. (Reuters) India's 2012-13 GDP growth estimated at 5.0%. (Reuters)
SummaryEstimate is the worst of all growth projections issued by the govt and the RBI.

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 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.

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 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.

INSTANT VIEWS/COMMENTARY

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

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