Slowdown hits India's growth, GDP to sink to 6.9% in FY12

The economic growth is likely to fall to a three-year low of 6.9 per cent in 2011-12, mainly due to sharp slowdown in manufacturing, agriculture and mining sectors, against 8.4 per cent expansion in the last fiscal.

Agriculture and allied activities are likely to grow at 2.5 per cent in 2011-12, compared to a robust growth of 7 per cent in 2010-11, according to the Advanced Estimates released on Tuesday by the Central Statistical Organisation (CSO).

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Manufacturing growth is also expected to drop down to 3.9 per cent in this fiscal from 7.6 per cent last year.

The CSO's GDP growth projection is a tad lower than the 7 per cent forecast made by the Reserve Bank of India in its quarterly monetary policy review last month.

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In its mid-year Economic Review, the government had also pegged growth at around 7.5 per cent.

The current estimate is a sharply lower than the 9 per cent growth projection for 2011-12 made by the government in its pre-Budget survey in February last year.

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The latest GDP growth estimate of 6.9 per cent for the entire fiscal means that the pace of economic expansion slowed in the second half of 2011-12, given that GDP growth in the April-September, 2011, period stood at 7.3 per cent.

According to the advance estimates, mining and quarrying is likely to witness a decline of 2.2 per cent, compared to a growth of 5 per cent a year ago.

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Growth in construction is also likely to slip to 4.8 per cent in 2011-12, against an 8 per cent in 2010-11.

Furthermore, the finance, insurance, real estate and business services sectors are likely to grow by 9.1 per cent this fiscal, against 10.4 per cent last fiscal.

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During the current fiscal, the trade, hotel, transport and communication sectors are projected to grow by 11.2 per cent, against 11.1 per cent last fiscal.

Community social and personal services are pegged to witness a growth of 5.9 per cent, compared to 4.5 per cent in the year-ago period.

The government and the RBI had earlier said that global economic slowdown and the high domestic interest rate regime is likely to act as a dampener in this fiscal's growth.

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Commenting on the GDP growth estimates, Planning Commission Deputy Chairman Montek Singh Ahluwalia said: "The 6.9 per cent is consistent with what we have been saying.

"We said 7 per cent for year (2011-12) as whole. (With) 7.3 per cent in the first half and 6.9 in the third quarter, 7 per cent is possible."

According to the data, growth in electricity, gas and water production is, however, likely to be better this year. The segments are expected to grow up by 8.3 per cent in 2011-12, against 3 per cent in 2010-11.

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However, the 6.9 per cent growth projected in the advanced estimates is lower than what experts have been forecasting.

The Indian economy had expanded by 8.4 per cent in both 2010-11 and 2009-10, while growth in 2008-09 was 6.7 per cent.

The advance GDP estimates are released before the end of a financial year to enable the government to formulate various estimates for inclusion in the Budget.