Economy on cyclical upswing: Kaushik Basu

The Central Statistical Organisation (CSO) on Tuesday revised the GDP (gross domestic product) growth estimates for 2010-11 slightly lower to 8.4 per cent from 8.5 per cent projected earlier.

As per the quick estimates of national income released by the CSO here, the country's GDP in 2010-11 at factor cost at constant prices (2004-05) grew by 8.4 per cent over the previous year. The services sector expanded by 9.3 per cent. The agriculture sector grew by 7 per cent as against 1 per cent in 2009-10. The rate of growth of industry was 7.2 per cent as against 8.4 per a year ago.

The savings rate is placed slightly lower at 32.3 per cent in 2010-11 as against 33.8 per cent in 2009-10, the fall was mainly due to a decrease in financial savings of the household sector. The gross domestic capital formation or the rate of investment is placed at 35.1 per cent in 2010-11 as against a level of 36.6 per cent in the previous fiscal.

The growth numbers for 2010-11 seem robust when compared to the Finance Ministry's estimates for the current fiscal and the next (2012-13). With hopes of improvement in governance and speedier reforms, the Ministry expressed confidence that economic growth in 2012-13 would edge up from a tad over 7 per cent during the current fiscal.

Addressing a press conference here, Chief Economic Advisor Kaushik Basu said, “We expect the growth next year to be higher than the growth this year, not higher by a large measure ... but we should see an improvement in 2012-13.”

Pointing out that “while there are reasons to believe that the Indian economy is on a path of cyclical upswing”, he noted that speeding up policy reforms and good governance were paramount for high growth.

Dr. Basu went on to concede that in the current global economic scenario and attendant domestic factors, the GDP growth this fiscal would be lower than 7.5 per cent (+,- 0.25 per cent) projected earlier. “We had said it will be 7.5 per cent with a small band around it. I am afraid we will be at the bottom end of the band...the growth rate will be less than 7.5 per cent for sure, may be just a little above seven per cent," he said.

The Finance Ministry, he said, would have a reasonably fair idea about the way the economy is going to perform in the current year, when the CSO is going to release the Advance Estimates for 2011-12.

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