The Indian economy is expected to grow at its slowest pace in a decade at a mere 5 per cent in 2012-13, on the back of dismal performance by the farm, manufacturing and services sectors, the first estimate for the year released Thursday by the Central Statistics Office showed.
But the government expressed confidence the numbers would improve in the revised estimates.
The estimate is lower than the 6.2 per cent growth clocked in 2011-12 and is the lowest since 2002-03, when the economy grew by 4 per cent. The latest data also belied prediction of a recovery by the Finance ministry and the Reserve Bank of India.
The RBI forecast had pegged GDP growth at 5.5 per cent while the Finance ministry had revised its estimate to between 5.7 and 5.9 per cent, with near 6 per cent growth projected for the second half of the fiscal.
“We are keeping a watch on the situation. We have taken and will continue to take appropriate measures to revive growth,” the Finance ministry said in a statement, pointing out that CSO projections are based on data until November 2012. “Since then, leading indicators have turned up, suggesting some hope that we will end the year on a better note,” it said.
Planning Commission deputy chairman Montek Singh Ahluwalia too discounted the data. “I am not certain that whether they have done it in a correct way. In the past also, the quarterly data was very frequently adjusted.”
But investor confidence was dented by the news and the Bombay Stock Exchange Sensex lost nearly 60 points to close at a one-and-a-half-month low level of 19,580.38. The Rupee too closed six paise lower at 53.22 against the US dollar.
The CSO’s advance estimate lowered the growth in agriculture and allied activities to 1.8 per cent in 2012-13, compared to 3.6 per cent 2011-12. Manufacturing growth is also expected to drop to 1.9 per cent in this fiscal, from 2.7 per cent last year.
“The estimates released today portray a weak picture of stabilising twin deficits. While the estimated investment rate in 2012-13 is likely to be similar to 2011-12, an 80 basis point increase in share of consumption expenditure (private and government) would reduce savings rate further leading to further widening of current account deficit in 2012-13,” said Devendra Pant, chief economist and senior director, India Ratings & Research, adding that it would also impact the fiscal deficit.