Putting at rest all doubts about the macroeconomic performance during the current year, the Central Statistical Organisation (CSO) has projected the real growth rate at only 6.9% — the worst since 2008-09 and a tad lower than the latest forecast of 7% by the Reserve Bank of India.
Implicitly, the economy is likely to fare badly in the second half of 2011-12, relative to the first half, based on the data just released by the CSO.The growth rate is likely to decelerate to 6.5% from 7.3% during the first six months of the year - the average of 7.7% clocked in the first quarter and of 6.9% in the second quarter.
On the price front too, the omens are far from good. The trend in GDP deflator — the most comprehensive measure of price variations in the economy — derived from the latest national income statistics, indicates that the common man has had no real respite and that the annual increase in GDP deflator may be as high as 8.2%; this is fractionally higher than the 2010-11 level of 8.1%.
Ironically, as the data used by the agency to derive the advance estimates of GDP reveal, this is despite a record harvest of foodgrains, with new peaks in both rice and wheat production.
But the good side of bad news is that during the second half of the ongoing fiscal, there is likely to be greater momentum in the pace of investment. For the full year, CSO has projected the rate of gross fixed domestic capital formation at 29.3%. In view of the fact that during the first and second quarters, these rates were estimated at 28.4% and 28%, respectively, or at an average of 28.2% for the April-September 2011 period, in the remaining six months of 2011-12, the rate of investment is projected to accelerate to around 30.3%, or by more than two full percentage points.
Curiously enough, the improved tempo of investment activity is also accompanied by a galloping pace of purchase of valuables - mostly, gold and silver - as affluent Indians too, like their counterparts in the rest of the world, try to seek the best hedge against inflation.
As a store of value, these items are time-tested and going by the expenditure side of the gross domestic product, the current year may end with a whopping spurt of 58% in the splurge on valuables to `258,015 crore; during 2010-11, the incremental growth under this category was also high, but still lagged far behind, at 40%. No wonder, then, that the rate of spending on valuables, relative to GDP at market prices, is slated to rise to 2.9% by March 2012 from 2.1% in the preceding year.
In contrast, only modest changes are likely in the rate of private final consumption expenditure during 2011-12 at 56.4% and, in government final consumption expenditure at 11.5%.
Once again, the service sector has emerged as the prime mover. All the three broad groups under which the tertiary sector is classified in the national accounts statistics — trade, hotels, etc; finance, insurance etc; and community, social and personal services — are instrumental in propelling the real GDP up to an estimated 6.9% during this year.
Unfortunately, the laggards were the secondary sector with the exception of electricity, gas and water supply where the growth had picked up to a projected 8.3% from the preceding year’s 3%. In manufacture, the contribution to real GDP might slow down to a mere 3.9% from 7.6%, while a decline of 2.2% is expected in the GDP emanating from mining & quarrying.
In the primary sector too, CSO has factored in a sharp deceleration in its advance estimate for 2011-12 - to 2.5% from 7%.
Though this may come as a surprise, it is not unexpected as the agency has clearly taken in to account the second advance estimates issued by the ministry of agriculture only a few days ago. The pronounced let-up in the growth of agriculture and allied sectors is due to the high base of 2010-11, when foodgrains production had soared to 245 million tonnes with a creditable showing in many of the commercial crops. This year, too, a repeat is forecast by the agriculture ministry with foodgrains harvest pegged at a all-time high of 250.42 million tonnes. Inevitably, this had acted as a drag on the growth rate which is reflected in the GDP projection for the current year.
Comments