Government cuts GDP growth estimate to just 5% this year

With one month to go before the end of the current year, the government of India has projected a GDP growth rate of 5% this year, down from 6.2% last year, according to its latest numbers.

Presenting India’s budget for 2012-13, former finance minister Pranab Mukherjee had said that India’s GDP will grow by 7.6 per cent this year.

The estimate is also more conservative than the 5.5 percent predicted by Crisil and Standard & Poor’s.

Both industry and agriculture are expected to drag down growth rates this year.

Even more depressing will be income growth, at just 2.9%, compared to 4.7 for 2011-12. National income, or average income per person, is likely to be about Rs 68,747, or about Rs 5,729 per month per person.

Overall national income will grow by 4.2, but out of that 2.3 percentage points will be cancelled out by population growth.

Private consumption will account for 56.9 per cent of the GDP, while government consumption will account for 11.8 per cent and savings (capital formation) will be 30.6 per cent.

In GDP, the ‘agriculture, forestry and fishing’ sector will grow by just 1.8 per cent compared to 3.6 per cent in 2011-12. Production of foodgrains is expected to decline by 2.8 per cent as compared to growth of 5.2 per cent in the previous agriculture year.

Production of cotton and sugarcane are also expected to decline by 4.0 per cent and 6.5 per cent, respectively, in 2012-13. Among horticultural crops, production of fruits and vegetables is expected to increase by 3.5 per cent during the year 2012-13 as against 5.1 percent in the previous year.

Constrained by high interest rates and inflation, the manufacturing sector will grow only 1.9 per cent during 2012-13.

However, the construction sector is likely to grow by 5.9 per cent during 2012-13, compared to 5.6 per cent in the previous year.

Growth for the trade, hotels, transport and communication sectors during 2012-13 is placed at 5.2 per cent as against growth of 7.0 percent in the previous year. This is mainly on account of decline of 3.4 per cent and 4.8 per cent respectively in passengers and cargo handled in civil aviation and decline of 3.1 per cent in cargo handled at major sea ports during April-November, 2012-13, the government said.

On the positive side, there has been an increase of 4.3 per cent in stock of telephone connections as on November 2012. The sales of commercial vehicles witnessed an increase of 0.74 per cent per cent in April-December 2012.

The sector, ‘financing, insurance, real estate and business services’, is expected to show a growth rate of 8.6 per cent during 2012-13, on account of 11.1 per cent growth in aggregate deposits and 15.2 per cent growth in bank credit as on December 2012 (against the respective growth rates of 17.2 per cent and 16.0 per cent in the corresponding period of previous year). The growth rate of ‘community, social and personal services’ during 2012-13 is estimated to be 6.8 per cent.