Slowdown? Growth not disappointing, says FM

Finance Minister Pranab Mukherjee said on Wednesday 6.9 per cent economic growth in the second quarter was not disappointing in view of global developments and the government will continue to adjust its policies to maintain growth in the medium-term.

"Taking into account (the trend) of the last two quarters together, it appears that the GDP growth would be around 7.3 per cent," Mukherjee told reporters, saying, "The growth performance is not all that disappointing."

GDP growth in 2010-11 stood at 8.5 per cent.

"Going forward, (I am) confident that we will be recovering some of the loss in our growth momentum," he said.

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GDP growth in the second quarter of the fiscal slowed to 6.9 per cent from 8.4 per cent in the corresponding period last year, mainly on account of a decline in mining and manufacturing output.

He said the Indian economy is battling both global and national problems and this is getting reflected in the mining and manufacturing figures.

"We are having multiple problems. . . slow growth of Europe and America. . . problems within the country and outside the country as well," Mukherjee said, adding, "We shall have to try to face the situation and to see what best we can do at this given situation."

Mukherjee said the decline in GDP growth is mainly on account of a slowdown in the manufacturing, mining and construction sectors.

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Constrained by the tight monetary policy followed by the Reserve Bank to tame inflation, the growth rate in the manufacturing sector nosedived to 2.7 per cent in the July-September quarter of FY'12 from 7.8 per cent in the corresponding quarter of the previous fiscal.

The output of the mining and quarrying sector declined by 2.9 per cent during the review period, in contrast to growth of 8 per cent in the second quarter of 2010-11.

Furthermore, agriculture production slipped to 3.2 per cent in Q2, FY'12, from 5.4 per cent in the corresponding period last fiscal.

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Mukherjee said the higher 9 per cent growth projected in the Budget would be difficult to achieve as GDP growth stood at only 7.3 per cent in the first half.

"Now hard days are coming. Present uncertainty with regard to global situation is creating concern about FII and FDI flows. We will continue to adjust our policies according to the developments," he said.

Mukherjee said even though second quarter growth has declined, there are some encouraging signs in the form of a rise in exports. Some key sectors like power and steel have also shown stronger growth, he added.

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He said the new manufacturing policy, which aims at increasing the share of the sector in the GDP to 25 per cent and create 100 million jobs in a decade, will 'give a big Push' to the manufacturing sector.

Mukherjee said the government is committed to its indicated fiscal balance for the current fiscal and is monitoring the resource mobilisation efforts as well as our expenditure.

"We would not hesitate to take the required correctives to remain on the path of fiscal prudence so that the short to medium-term growth prospects are not undermined," he said.