FY ’12-13 GDP growth seen at 5 pc, lowest in a decade

But the government expressed confidence the numbers would improve in the revised estimates.

The estimate is lower than the 6.2 per cent growth clocked in 2011-12, and is the lowest since 2002-03, when the economy grew by 4 per cent. The latest data also belied prediction of a recovery by the finance ministry and the Reserve Bank of India.

The RBI forecast had pegged GDP growth at 5.5 per cent while the finance ministry had revised its estimate to between 5.7 and 5.9 per cent, with near 6 per cent growth projected for the second half of the fiscal.

"We are keeping a watch on the situation. We have taken and will continue to take appropriate measures to revive growth," the finance ministry said in a statement, pointing out that CSO projections are based on data until November 2012. "Since then, leading indicators have turned up, suggesting some hope that we will end the year on a better note," it said.

Planning Commission deputy chairman Montek Singh Ahluwalia too discounted the data. "I am not certain that whether they have done it in a correct way. In the past also, the quarterly data was very frequently adjusted."

But investor confidence was dented by the news and the Bombay Stock Exchange Sensex lost nearly 60 points to close at a one-and-a-half-month low level of 19,580.38. The Rupee too closed six paise lower at 53.22 against the US dollar.

The 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 estimates released today portray a weak picture of stabilising twin deficits. While the estimated investment rate in 2012-13 is likely to be similar to 2011-12, an 80 basis point increase in share of consumption expenditure (private and government) would reduce savings rate further leading to further widening of current account deficit in 2012-13," said Devendra Pant, chief economist and senior director, India Ratings & Research, adding that it would also impact the fiscal deficit.

More worryingly, consumption expenditure is likely to fall, even though investments will pick up to 3.9 per cent as against 1.5 per cent last fiscal. "Total consumption growth slowed significantly to 4.1 per cent versus 8.1 per cent in FY12 due to a sharp drop in both private consumption and public consumption," Citi economist Rohini Malkani wrote in a note, adding that it could increase next fiscal, which is a pre-election year.

According to the estimates, 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. Meanwhile, 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.

India Inc. was quick to call for a rate cut. RBI Governor, D Subbarao, who was in Guwahati, said, "We will take that (latest estimate) into account as and when we make our next policy. I am unable to comment on rate cuts at this forum." The RBI in its third quarter monetary policy review last month lowered key lending rates as well as the cash reserve ratio by 25 basis points to help spur growth.

Analysts however believe that more reforms can improve growth prospects for next fiscal even though they are scaling down their estimates. "Taking into account the 5 per cent GDP estimate for FY'13 and revisions to past data, we are revising our FY'14 GDP estimate down to 5.7 per cent from 6.2 per cent," Citi said.

Bad news

* Growth estimate lowest since the 4 per cent clocked in 2002-03

* Second half growth likely to be 4.6 per cent, against 5.4 in the first half

* Lower growth projected despite downward revision in GDP for FY' 12

* GDP revision means the fiscal deficit/CAD targets

are at greater risk

* Economists now pare growth projected for FY '14 to under 6 per cent

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