CMIE expects revival, pegs GDP growth at 7.3%

Even after the government data showed a sharp fall in FY12 growth numbers and the April factory output data at a poor 0.1 per cent, a leading economic think tank on Thursday said it expects a revival in fortune and pegged GDP growth for the current fiscal at 7.3 per cent.

"This expectation (of revival) assumes that the supply bottlenecks that caused the sharp fall in the growth during 2011-12 will be eased during 2012-13," the Centre for Monitoring Indian Economy (CMIE) said in its monthly report.

Official data released late last month had pointed out to quarterly growth falling to a nine-year low of 5.3 per cent in the three months ended March 31, while the same for fiscal 2011-12 stood at 6.5 per cent, lower than the 6.7 per cent clocked during the peak of the credit crisis in 2008-09.

This has led to a rash of downward revisions of GDP growth forecasts by rating agencies, investment banks and development finance institutions, with some estimates going below the psychological 6 per cent mark.

The sharp fall in growth is being blamed on weak global conditions, especially eurozone's sovereign credit crisis, drastic fall in the rupee value and a host of domestic factors like 'policy paralysis', scams, fiscal imprudence and elevated interest rates due to high inflation.

In support of its estimate, CMIE said it expects improvements on all worrying issues on the supply side, which have dented growth, like an 8.3 per cent rise in coal production versus 1.2 per cent in FY12 and a 5.3 per cent jump in natural gas output compared to 9 per cent drop last fiscal.

"The improved supply of coal, gas and crude oil would help higher growth in manufacturing and electricity sectors."

Despite the Index of Industrial Production (IIP) growth rate falling to 0.1 per cent in April, CMIE said it expects manufacturing to grow at 5 per cent in FY13.

"Following the acceleration in mining, manufacturing and electricity sectors, the industrial sector growth is expected to accelerate to 6.3 per cent in 2012-13 compared to 3.4 per cent in 2011-12," the Mumbai-based agency said.

CMIE said it expects agriculture to grow by a modest 2.4 per cent during the current fiscal.