Manufacturing,mining drags Q3 GDP growth

* At 6.1%,GDP grows slowest in 2 years

Indias economy grew by 6.1 per cent during Q3 of this fiscal,its slowest pace in over two years,with manufacturing and mining sectors dragging down growth from the 8.3 per cent clocked during the corresponding year ago period.

The moderation in growth rate,which comes ahead of RBIs monetary policy review on March 15,is largely being attributed to high interest rate,higher cost of borrowing along with inaction from the government on the economic reforms front.

Finance Minister Pranab Mukherjee said though the figure was disappointing,it was not unexpected. If,I take first quarter,second quarter,third quarter taken together,it is also indicating a downward trend, he said.

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According to data released by the Central Statistical Organisation (CSO),manufacturing sector growth during the quarter fell sharply to 0.4 per cent from 7.8 per cent during the same period a year ago. The farm sector registered a growth 2.7 per cent,down from 11 per cent in Q3 of the last fiscal while mining and quarrying production contracted by 3.1 per cent during the quarter as against a growth of 6.1 per cent in the corresponding period last fiscal.

During April-December 2011-12,the growth rate slowed to 6.9 per cent from 8.1 per cent during the same period last fiscal. Low growth in Q3 is likely to impact the overall economic growth. While the CSO has projected GDP growth for 2011-12 at 6.9 per cent,the PMEAC pegs it at 7.1 per cent.

The dismal growth figure prompted industry to demand a cut in key interest rate and concrete policy action from the government to prop up growth. The industry has also urged the finance minister to refrain from increasing excise and service tax as it will hurt manufacturing.

GDP growth print for Q3 FY12 indicates a broad-based weakness across sectors and demand segments. Industrial growth,both manufacturing and mining,are lower than the post 2008 crisis. Investment rate is down to 28 per cent,the lowest in the last 7 years. Although consumption growth has held up,this was predominantly due to a base revision. There is an urgent need to revive manufacturing growth and capex,and this requires a coordinated thrust from monetary,fiscal and industrial policies, Saugata Bhattacharya,chief economist,Axis Bank,said.

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According to the data,the construction sector slowed to 7.2 per cent during Q3 from 8.7 per cent in the same period a year ago while the services sector recorded a growth of 8.6 per cent. It was on expected lines… We would expect this to be the bottom or close to the bottom and Q4 is likely at 6.1 per cent too. RBI is expected to factor in these growth dips and start cutting rates from April… But RBI might not be able to cut policy rates aggressively as inflation concerns persist…, Indranil Pan,chief economist,Kotak Mahindra Bank,said.