The gloomy picture painted by national income data released on Tuesday may not be surprising but a detailed analysis of the numbers does indeed provide grounds for concern. According to the advance estimates of GDP growth, the economy will grow by 6.9 per cent during the current year (2011-12), sharply lower than the 8.4 per cent clocked last year. The implication is that the economy, which grew by 7.3 per cent during the first half of the year (April-September), will decelerate to 6.5 per cent during the second half. That the pace of growth during the current year will be the lowest in three years need not by itself cause alarm. It may even be argued that a growth rate of almost 7 per cent is commendable given the adverse global and domestic environment. However, the signs of the slowdown continuing are discernable everywhere. Official data published during the year such as the monthly index of industrial production have captured this deceleration in unmistakable terms. That is why most forecasters, official as well as private, lowered their growth estimates as the year progressed. The government alone remained over optimistic: having pitched for a growth rate of around 9 per cent in the budget, North Block took a long time to revise this to levels which were a little more realistic but still higher than other forecasts.
Of direct relevance to the Finance Ministry's exertions in the run up to the March 16 budget is the question of what the advance estimates say about the economy for the next year (2012-13). There are indications that agriculture, estimated to grow by just 2.5 per cent during the current year, will actually post a more impressive rate of growth. There has been a bountiful harvest of wheat and rice and this has not been fully captured by official statistics. However, the production of coarse grains has lagged behind and it would be naïve to take the monsoons for granted. Among the other less hopeful factors, capital formation, a crucial indicator of future growth, appears to have fallen by a few percentage points. Manufacturing, a key growth driver, will therefore most likely remain subdued. In turn, this means Indian exporters will not be able to take full advantage of a possible global recovery. The construction industry, with a huge employment potential, is forecast to grow by only 4.8 per cent this year, down from 8 per cent. Mining, whose performance has a bearing on key industries such as power generation, has contracted. With the right policy reorientation — and a reform process that ensures transparency and regulation — it should be possible to revive these key sectors and post more impressive growth figures next year.
Keywords: Indian economy, India GDP, GDP growth, economic growth
Why are we , as a nation ,obsessed with only GDP growth ? Is GDP growth the panacea for all India's problems ? There is no growth in jobs and there is 'despair driven exodus' from rural areas ,all in a period of very rapid GDP expansion , then whom is this GDP growth really benefitting ? Those in the Govt, the most ( average asset worth of a union minister rose from Rs.7.3 crore to Rs.10.6 crore in 28 months. Adding a modest million a month on average through 28 months.Ref the article "Indian cabinet gets healthier "),then the Corporates and trickling down to the Indian middle class .The same decade or let us say past 7-8 years , also has seen a period of mind boggling corruption & sell-off of the national resources ,under the UPA Govt . But the Govt claims "India is rising", with deception at the heart of this publicity campaign. Even after 65 years of Independence of which 60 years were under the Congress , majority Indians (70% or more)are still kept deprived and desperate .
The sheer down in GDP growth rate compare to last year and last quater is not a good sign. Now time came to concentrate more on the core part- Agricultue to maintain a healthy GDP throught year. Goverment should plan more agriculture based industry and create more job oppturnity for youth in this area to maximise the percentage of agriculture in GDP.
Economic growth which will have a direct bearing on the lives of Indians is not given it due importance. A prominant industrialist said on TV the other day farmers along can give a GDP of 7%. If true what is the govt doing? We are blatantly not utilising our potential. Government should plan and manage for a 10% GDP. This inaction of goverment will affect present generation and future generations. Looks like Congress party wants many Indians as Poor so that they can chant to them Garbi Hattavo! Even after 65 years of independance and self rule we still taking British Aid!!!!
If we consider the inflation rate, real growth rate will be still lower than projected 6.9%. Indicators of falling growth rate were noticed earlier; writing on the wall was clear quite a few months back. Only admission of the reality is late. Without implementation of necessary reforms and long tem planning, a country cannot achieve the goal of good economic growth on a sustainable basis. But the blame for this state of affairs should go to the entire political class, not just the Congress led UPA government. There is very little introspection on the part of these parties. It is time all of them join hands to close avenues of revenue leakages and disband unviable subsidies. One hopes that things will improve and the country can return to days of good growth.
Thanks for an insightful article, but it would have been helpful to divide your analysis into external factors - external to India - vs internal factors which contributed to the slow down. I would suspect that internal factors weighed far more than external ones to the overall business and consumer confidence. The policy paralysis, Inflation, currency fluctuations, high interest rates and scams have made the investors more cautious about investment in India which impacts on the local economy far more than export orientated businesses. Given the SC order of 2G licenses cancellations, businesses and investors are owed an explanation by the Govt, that their procedures are above board and not contrary to Law i.e. there is no structural risk.
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