According to the advance estimates of national income released by the govt GDP is likely to moderate to 8.7% in the current fiscal due to slow expansion in industrial output.
The industrial output has been hit by high interest rates and sluggish agriculture. The Gross Domestic Product (GDP) had grown at 9.6 per cent in 2006-07, which was the highest in 18 years.
"GDP at factor cost at constant (1999-2000) prices in the year 2007-08 is likely to attain a level of Rs 31,14,452 crore as against Rs 28,64,310 crore in 2006-07," according to the advance estimates of national income released by the government on Thursday.
The GDP grew at 9.1 per cent during the first half of this fiscal. It grew at 9.3 per cent in the first quarter and 8.9 per cent in the next three-month period. The advance estimates showed a further moderation during the rest of the year.
The estimated growth rate is slightly higher than the conservative RBI projection of 8.5 per cent, but less than 9.1 per cent, projected by economic think tank NCAER.
Finance Minister P Chidambaram had earlier exuded confidence that the economy will grow close to 9 per cent during 2007-08.
High interest rates have pushed up cost of producing industrial goods and reduced demand for consumer goods, affecting manufacturing growth.
The manufacturing sector is likely to grow at 9.4 per cent during the fiscal as against 12 per cent last year.
The advance estimates revealed that agri and allied activities will likely expand at 2.6 per cent as against 3.8 per cent in the previous year.
Analysts expressed concern over the slowdown in farm sector despite good monsoons, saying it will affect prices of agricultural produce.
"Agriculture is the only major worry. Slowdown in agriculture growth does not augur well for prices of farm products," CRISIL Principal Economist D K Joshi said.
In the industrial sector, mining and quarrying sector is estimated to grow at 3.4 per cent as compared to 5.7 per cent in the previous financial year.
Construction activities are projected to moderate to 9.6 per cent as against 12 per cent. Electricity, gas and water supply would be the only saving grace in the industrial activities as they are shown to be growing at 7.8 per cent against six per cent.
Joshi said it is a good opportunity for the Finance Minister to cut indirect taxes in the coming Budget on industrial goods as it would spur their production as well as reduce their prices to boost demand.
Taking a cautious approach, the RBI had retained the key interest rates in its quarterly review of the monetary policy last month. Some banks have already reduced interest rates on some categories of loans.
Among the booming services sector, trade, hotels, transport and communication activities are likely to expand by 12.1 per cent from 11.8 per cent last year.
Community, social and personal services are estimated to grow at 7 per cent, against 6.9 per cent.
However, finance, real estate and business services are estimated to grow at 11.7 per cent as against 13.9 per cent.
According to the estimates, an Indian, on an average, is likely to have 11.8 per cent more money at Rs 33,131 this year, against Rs 29,642 in 2006-07. National income is likely to grow at 9.1 per cent (Rs 27,60,325 crore) in 2007-08 as compared to 9.7 per cent (Rs 25,30,495 crore) last fiscal.
FM confident of close to 9 pc growth
Finance Minister P Chidambaram, while reacting to advance GDP estimates of national income released on Thursday, sounded confident that the economy will grow at close to 9 percent rate this fiscal.
"I am reasonably confident that figures may be revised and economy will grow at close to nine per cent," Chidambaram said.
"The Central Statistical Organisation figures are lower than what I had anticipated. We are disappointed but not despondent," he said.
Poor figures are mainly because of projected low rate in the agriculture sector, he said.
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