India's GDP growth to fall to 5%, lowest in a decade

India's economic growth rate this fiscal is estimated to be sharply lower at 5 per cent, lowest in a decade, on account of poor performance of manufacturing, agriculture and services sector.

This estimate by CSO is drastically lower than what has been projected thus far by the government and RBI.

"The growth in GDP (Gross Domestic Product) during 2012-13 is estimated at 5 per cent as compared to a growth rate of 6.2 per cent in 2011-12," according to the Advanced Estimates released on Thursday by the Central Statistical Organisation (CSO).

In 2002-03, the GDP had grown at 4 per cent. Since then the Indian economy has been expanding at over 6 per cent, the highest rate being 9.6 per cent in 2006-07.

CSO's advance estimate lowered the growth in agriculture and allied activities to 1.8 per cent in 2012-13, compared to 3.6 per cent 2011-12.

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Manufacturing growth is also expected to drop to 1.9 per cent in this fiscal, from 2.7 per cent last year.

The CSO's GDP growth projection is a lower than the 5.5 per cent forecast made by the Reserve Bank in its quarterly monetary policy review last week.

In its mid-year Economic Review, the government had also estimated growth ranging from 5.7-5.9 per cent. The current estimate is a sharply lower than the 7.6 per cent growth projection for 2012-13 made by government in Budget.

The latest estimate of 5 per cent for the entire fiscal means that the pace of economic expansion has slowed sharply in the second half of 2012-13, given that GDP growth in the April-September period stood at 5.4 per cent.

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According to the advance estimates, the services sector including finance, insurance, real estate and business services sectors are likely to grow by 8.6 per cent this fiscal, against 11.7 per cent last fiscal.

However the growth in the mining and quarrying is likely be slightly better at 0.4 per cent, compared to contraction of growth of 0.6 per cent a year ago.

Growth in construction is also likely to be 5.9 per cent in 2012-13, against 5.6 per cent last year.

According to the CSO's advance estimates, growth in electricity, gas and water production is likely to decline to 4.9 per cent in 2012-13, from 6.5 per cent in 2011-12.

During the current fiscal, the trade, hotel, transport and communication sectors are projected to grow by 5.2 per cent, as against 7 per cent last fiscal.

Community social and personal services growth however would be slightly better at 6.8 per cent, compared to 6 per cent in previous fiscal.

Overall, the 5 per cent growth in the advanced estimates is lower than what experts have been forecasting. On Wednesday, the International Monetary Fund (IMF) had said that the Indian economy would grow by 5.4 per cent in 2012-13, but should pick up to six per cent in next fiscal.

The Indian economy had expanded by 8.4 per cent in both 2010-11 and 2009-10, while growth in 2008-09 was 6.7 per cent.

The advance GDP estimates are released by the CSO before the end of a financial year to enable the government to formulate various estimates for inclusion in the Budget.