GDP growth in FY 12 likely to disappoint

Even as memories are fresh of the recent Index of Industrial Production goof-up, the Ministry of Statistics and Programme Implementation is yet to receive all the required data for issue of gross domestic product for 2011-12, though barely four days remain to do so.

Initial trends show that even services numbers, expected to hold up GDP, are very weak, government officials say.

This may pull down the overall GDP growth to less than the 6.9 per cent calculated in advance estimates for 2011-12.

The actual figures are slated to be released on Thursday.

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GDP growth was 6.7 per cent during the global financial crisis period of 2008-09.

In 2009-10 and 2010-11, economy grew by 8.4 per cent.

Industrial production data is anyway bad, growing by just 2.8 per cent in 2011-12 against 8.2 in 2010-11, though the agriculture sector may provide some relief.

The ministry had earlier expressed helplessness when the IIP data goof took place, saying it had received data much after the deadline of the last working day of the month previous to the one when the data is to be released.

Mospi had estimated the January industrial growth figure at 6.8 per cent, while the revised figures were just 1.1 per cent.

This gross error was described as 'totally baffling' by Finance Minister Pranab Mukherjee.

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On the GDP data, Mospi had advised all the agencies to give it the data a week before the numbers were to be released, so that it could detect any errors and rectify these.

However, government officials said all the data for the purpose of calculating the GDP were yet to be sent to the ministry.

Even the Reserve Bank, they said, had yet to do so (for a part of the private corporate services sector).

They, however, played this down saying, "It (RBI) may be waiting for more numbers to arrive from private companies. It is only better to wait for more data than to calculate final figures with less data, which may show biased numbers," said an official.

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Sombre trends

For the economy to grow by 6.9 per cent in 2011-12, GDP growth for the fourth quarter needs to be 6.9 per cent.

Initial trends do not suggest this number may be met, officials said, without specifying the numbers.

GDP has been on a decline since the beginning of 2011-12, from 7.7 per cent growth in the first quarter to 6.9 per cent in the second quarter and 6.1 per cent in the third quarter.

Economists have already doubted the numbers given by the advance estimates.

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Icra economist Aditi Nayar pegged GDP growth for the January-March quarter at 6.2 per cent, due to weak performance of the manufacturing and mining sectors in the IIP.

Industry showed growth of 6.5 per cent in the first quarter of 2011-12, of 2.79 per cent in the second quarter and 0.79 per cent in the third quarter.

It needs to grow 4.3 per cent in the fourth quarter to attain the 3.6 per cent growth for 2011-12 in line with the advance estimates.

However, IIP growth in the January-March quarter was just 0.4 per cent.

It contracted 3.5 per cent in March, after growing 1.1 per cent and 4.1 per cent in January and February, respectively.

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Mining stayed negative in eight months of 2011-12 and the IIP grew just 2.8 per cent in 2011-12.

In the advance estimates, farm and allied sector growth was pegged at just 2.5 per cent for 2011-12 because of the high base effect of seven per cent the year before.

Many economists are expecting farm growth to be better than the advance estimate figure.

The sector needs to grow by just 0.76 per cent in the fourth quarter to achieve the growth calculated by advance estimates for all of 2011-12.

However, the negative impact from industry may more than neutralise positive news from the agriculture sector, economists said.

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This leaves the services sector but this is now also expected to be weaker.

In the first three quarters, services (including construction) grew 8.7 per cent.

By the advance estimates, in 2011-12, services would grow by 8.8 per cent, for which the fourth quarter growth needs to be 8.9 per cent.

The weakness in services growth could be also be attributed to dismal industry performance.

"Industry has a lag impact of one to two quarters on services," said Arun Singh, senior economist, Dun and Bradstreet.