India’s gross domestic product or GDP growth is expected to be lower than 7% at 6.9 per cent, according to advance estimates for the year ending March 2012. This is the slowest growth after 2008-09 when India registered a growth rate of 6.7 per cent.
"There may be slow growth in the sectors of ‘agriculture, forestry and fishing’ (2.5%), manufacturing (3.9%) and construction (4.8%). The growth in the mining and quarrying sector is estimated to be negative(-2.2%),' the government release said.
These estimates confirm a slowdown in growth in the second half of the financial year 2011-12. Growth in the first half of the fiscal deficit slowed to 7.3 per cent. Analysts expected the government to announce a growth range of 7 to 7.5 per cent for the full year.
Finance minister Pranab Mukherjee anticipates an upward revision in the GDP growth number when the full data for year 2011-12 is compiled. RBI governor D Subbarao also said that the GDP data could be revised upwards.
Mukherjee blamed the slowdown in the industrial sector. “The negative growth in mining sector along with slowdown in construction sector has also contributed to the decline in GDP growth,” he said in a statement.
India’s growth has slowed from 8.4 per cent registered in the financial year 2010-11.
Commenting on the GDP growth estimates, Planning Commission Deputy Chairman Montek Singh Ahluwalia said, "The 6.9 per cent is consistent with what we have been saying.
“We said 7 per cent for year (2011-12) as whole. (With) 7.3 per cent in the first half and 6.9 in the third quarter, 7 per cent is possible.”
Gross Fixed Capital Formation (GFCF) at current prices is estimated at Rs. 26,09,963 crore in 2011-12 as against Rs. 23,31,382 crore in 2010-11. Gross capital formation is the percentage of GDP invested in creating new fixed assets. Any weakness in gross capital formation means an economy is slowing down.
This means GFCF grew 11 per cent against a fall of 0.6 per cent in the quarter to September 2011.
The government and the RBI had earlier said that global economic slowdown and the high domestic interest rate regime is likely to act as a dampener on the current fiscal's growth.
Prime Minister Manmohan Singh on 3 February 2012 said that the country's economic growth is likely to slow down to 7-7.5 per cent blaming the continuing uncertainty in the global economic environment.
RBI advised the government on Monday that it was necessary to cut the fiscal deficit to stimulate growth. Fiscal deficit is the amount the government has to borrow from the central bank (RBI) to meet its expenses.
The government's fiscal deficit in 2011-12 is expected to exceed the budget estimate of 4.6 per cent of the GDP on account of subdued receipts and overshooting of the subsidy bill by at least Rs 1 lakh crore over and above the original projection.
Many pundits have called for a tighter fiscal policy and loose monetary policy. “At the current juncture when there is a need to boost private investment, the increase in fiscal deficit could potentially crowd out credit to the private sector,” the RBI statement said last month.
ANNUAL GDP GROWTH DATA
FY 12: 6.9% ( Advance Estimate)
FY 11: 8.4%
FY 10: 8.4%
FY 09: 6.7%
FY 08: 9.3%
FY 07: 9.6%
FY 06: 9.5%