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India's 2010-11 GDP at 8.5%; Q4 growth slips to 7.8%

Confirming fears of a slowdown, India's economy grew by just 7.8 per cent in the fourth quarter ending March this year, mainly due to poor performance of the manufacturing sector, as against 9.4 per cent in the same three-month period of the previous fiscal.

However, economic growth, as measured by the gross domestic product, improved to 8.5 per cent in 2010-11 from 8 per cent in 2009-10 due to better farm output and construction activities and financial services performance.

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India's 2010-11 GDP at 8.5%; Q4 growth slips to 7.8%

Meanwhile, the GDP growth figures for the first and third quarters of FY'11 have been revised upward.

While the GDP growth figure for the first quarter has been pegged at 9.3 per cent -- as against the earlier estimate of 8.9 per cent -- the Q3 GDP growth has been revised upward to 8.3 per cent from 8.2 per cent.

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India's 2010-11 GDP at 8.5%; Q4 growth slips to 7.8%

During the quarter ending March 31 this year, growth in the manufacturing sector slowed down to 5.5 per cent from 15.2 per cent in the same quarter of 2009-10.

In addition, the mining and quarrying sector grew by only 1.7 per cent during the quarter under review, as against 8.9 per cent in the fourth quarter of the previous fiscal.

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India's 2010-11 GDP at 8.5%; Q4 growth slips to 7.8%

Furthermore, the trade, hotels, transport and communications segment grew by 9.3 per cent in the March quarter this year, as against 13.7 per cent expansion in the same the period of 2010.

However, services including banking and insurance grew by 9 per cent in the March quarter this year, compared to 6.3 per cent in the corresponding period last year.

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India's 2010-11 GDP at 8.5%; Q4 growth slips to 7.8%

Farm output showed tremendous improvement, growing at 7.5 per cent during the quarter under review, compared to a meagre 1.1 per cent in the same three-month period last year.

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India's 2010-11 GDP at 8.5%; Q4 growth slips to 7.8%

Though economic expansion slowed down in the fourth quarter, overall GDP growth touched the 8.5 per cent mark in 2010-11, as against 8 per cent in 2009-10, due the smart recovery in farm output.

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India's 2010-11 GDP at 8.5%; Q4 growth slips to 7.8%

The agriculture and allied sectors grew by 6.6 per cent during the fiscal, as against a meagre 0.4 per cent in the previous year.

The growth of services, including banking and insurance, improved to 9.9 per cent in 2010-11 from 9.2 per cent in the previous fiscal.

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India's 2010-11 GDP at 8.5%; Q4 growth slips to 7.8%

The trade, hotels, transport and communication segment grew by 10.3 per cent in FY'11, as against 9.7 per cent last fiscal, while growth of the construction sector stood at 8.1 per cent, as against 7 per cent in the previous financial year.

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India's 2010-11 GDP at 8.5%; Q4 growth slips to 7.8%

However manufacturing sector growth slowed down to 8.3 per cent in the 2010-11 financial year from 8.8 per cent in 2009-10.

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India's 2010-11 GDP at 8.5%; Q4 growth slips to 7.8%

Growth of the mining and quarrying sector also slowed to 5.8 per cent in 2010-11 from 6.9 per cent in 2009-10.

The electricity, gas and water supply segment grew by 5.7 per cent last fiscal, compared to 6.4 per cent in 2009-10.

India's 2010-11 GDP at 8.5%; Q4 growth slips to 7.8%

Meanwhile, bankers on Tuesday said a slowdown in GDP growth to 7.8 per cent in FY 11's last quarter was on expected lines as the Reserve Bank and international agencies like the IMF had already hinted at a dip in growth.

"(It) is not something totally unexpected. It was clear (through) many of RBI's reports and international financial institutions had been hinting that the growth may not be same as last year," Central Bank of India's Chairman and Managing Director, S Sridhar, said.

Looking at the possible slowdown in growth, banks have already taken the right steps, he said, adding that the RBI has also downsized the growth expectations both in advances and deposits in its annual monetary policy. With data released today confirming the fears of slowdown in growth, lenders and other agencies will have to take a "more nuanced" response, he said.

Union Bank of India Chairman and Managing Director M V Nair said one should not read too much into the 7.8 per cent number as it is only a couple of notches below the RBI's forecast of 8 per cent.

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India's 2010-11 GDP at 8.5%; Q4 growth slips to 7.8%

"A few points here and there should not matter much," he said, conceding that the numbers are less than what he had expected. Both Sridhar and Nair drew attention towards the RBI's stated policy of targeting the rising inflation number even if it results in the growth slowing down in the near term.

"I think growth per se should be based on strong foundation on a base of lower inflation...trying to control inflation is more important," Nair said. RBI has increased its key rates a record eight consecutive times in the last 12 months with a view to tame the inflation number, the last one being a higher-than-expected 50 bps hike on May 3.

The headline inflation for April 2011 was at 8.66 per cent. Sridhar also pointed out to certain positives like the forecast of a normal monsoon and a good show on the exports front.

"There is cause for optimism. There is no cause for pessimism at this stage just because the number has come down to 7.8 per cent," he said.