THE Indian economy is sustaining its growth momentum, with the Central Statistical Organisation forecasting growth in the current fiscal at 8.7%. This is slower than the 9.6% growth achieved in 2006-07 and 9.4% registered in 2005-06, but on par with the average annual compound growth rate achieved over the four years of high growth commencing in 2003-04.
Relatively slow expansion in industrial and farm output is responsible for the slowdown in growth.
What is truly remarkable about the national income figures put out by the CSO is the investment rate, which has climbed to a historic high of 38.5% of GDP. This augurs well for future growth prospects of the economy. And savings are projected to grow to 37% of GDP, another historic high. The CSO has revised upwards the savings and investment figures for the past two fiscals as well, points out ICRA chief economist Saumitra Chaudhuri.
The CSO figures also reveal that economywide price rise would be limited to 4.5% for the year as a whole. The forecast also brings out the real slowdown in exports. In rupee terms, export growth would be just 8.6%.
The CSO’s figures are marginally lower than the forecast by the Prime Minister’s Economic Advisory Council in its report which said the economy would grow at 8.9 % this fiscal. While both forecasts estimate non-farm GDP growth to be 10.1%, CSO’s farm growth estimate, at 2.6% against 3.8% last year, is sharply lower than the EAC’s forecast of 3.6%. There is every likelihood of this estimate being revised upwards, an optimism shared by the finance minister.
Mr Chidambaram on Thursday sounded confident that the economy will grow at a rate of “close to 9%” this fiscal. “I am reasonably confident that figures may be revised and economy will grow at close to 9%. The Central Statistical Organisation figures are lower than what I had anticipated. We are disappointed but not despondent,” Mr Chidambaram said. Poor figures are mainly because of projected low rate in the agriculture sector, he said.
GDP at factor cost at constant (1999-2000) prices in the year 2007-08 is likely to attain a level of Rs 31,14,452 crore as against Rs 28,64,310 crore in 2006-07,” the advance estimates of national income released on Thursday said. The GDP grew at 9.1 % during the first half of this fiscal. It grew at 9.3 % in the first quarter and 8.9% in the next. The advance estimates showed a further moderation during the rest of the year. The total value of the Indian economy at current market prices stands at Rs 47 lakh crore ($1.175 trillion) The per capita income at current prices this fiscal is estimated to be Rs. 33,131 as compared to Rs. 29,642 last year, showing a rise of 11.8%. There is 20% increase in the estimated gross fixed capital formation at current prices this fiscal at Rs. 16,25,914 crore as against Rs. 13,46,501 crore last year.
Economists attributed the slowdown to higher real interest rates and a slowdown in consumer demand. “But this is not a collapse. The drivers of India’s growth such as growth in capital formation and infrastructure up-gradation, still remain intact,’’ Lehman Brothers economist Sonal Varma said. In addition to the moderation in manufacturing sector which was expected, what is worrying experts is the slowdown projected in the farm sector despite a good monsoon. The advance estimates revealed that agriculture and allied activities will likely grow at a much slower rate of 2.6 % during the fiscal, against 3.8 % in the previous year. “Agriculture is the only major worry. Slowdown in agriculture growth does not augur well for prices of farm products,” CRISIL Principal Economist D K Joshi said.
As per official statement, manufacturing growth is likely to come down from 12 % last fiscal to 9.4 %. Mining and quarrying sector is estimated to grow at 3.4 % as compared to 5.7 % in the previous financial year. Among the booming services sector, trade, hotels, transport and communication activities are likely to expand by 12.1 % from 11.8 %. However, finance, real estate and business services are estimated to grow at 11.7 % as against 13.9 %.