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.

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