GDP seen growing at decade-low 5%
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The CSO data showed that the economic slump could be deeper than anticipated, with across-the-board slowdown in sectors including agriculture, industry and services. Bond yields fell sharply on Thursday, in expectations of deep rate cuts from the RBI at its monetary policy review scheduled next month. The Stock markets largely ignored the GDP data, with the benchmark BSE Sensex ending down 0.30% at 19,580.32 points on Thursday. The government on Thursday successfully raised about Rs 11,400 crore through its disinvestment in NTPC — the largest stake sale in 2012-13. Analysts expect the government to contain the fiscal deficit at 5.3% by March-end, even as lower government spending could curb growth.
Growth in agriculture and allied activities has been pegged at 1.8% in 2012-13, compared with 3.6% 2011-12. Manufacturing growth is estimated at 1.9% in 2012-13, down from 2.7% in 2011-12. The finance, insurance, real estate & business services sectors are likely to grow by 8.6% in 2012-13, against 11.7% in 2011-12. Expansion in the construction sector is pegged at 5.9% in 2012-13, against 5.6% in 2011-12.
Kotak Mahindra Bank chief economist Indranil Pan said the lower GDP number was a largely a statistical quirk, as the previous year's growth numbers have changed. "I don't see too many changes in the the growth trajectory. The bond market is reacting too positively," Pan said, adding that it could be the beginning of the economic turnaround story. Expansion in financial & insurance sectors indicate a slowdown, while construction numbers have also been weak, he said.
DK Joshi, chief economist, Crisil, had earlier said that he expected the RBI to cut rates by 75 basis points between now and March 2014.
The economic growth for 2011-12 was recently revised downwards to a nine-year low of 6.2% from the earlier estimate of 6.5%. The CSO also revised the growth rates for 2010-11 and 2009-10 to 9.3% and 8.2%, respectively, from 8.4% each earlier. There had been a sharp decline in the savings rate to an eight-year low of 30.8% of GDP in 2011-12 from 34% in the previous year and the fall in the investment rate to a three-year low of 35% from 36.8% in the previous year.
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