Govt pegs economic growth at 6.9%

“Though figures of advance estimates for GDP for the current fiscal somewhat look disappointing by our recent growth experience,considering the current global context and the slowdown in the domestic industrial sector in particular,the growth performance is not all that surprising,” Mukherjee said.

Lower growth will also have implications on the fiscal deficit front,which is expected to exceed 4.6 per cent of the gross domestic product (GDP) due to rising subsidy bill,driven mainly by high prices of crude oil in global markets. According to experts,the fiscal deficit could be as high as 5.5 per cent.

The government had initially estimated a growth rate of 9 per cent for 2011-12. However,the projection was gradually scaled down to around 7 per cent by the government as well as the Reserve Bank,in view of various international and domestic factors.

India was growing at above 9 per cent before the global financial meltdown pulled down the growth rate to 6.7 per cent in 2008-09. It,however,recovered to 8.4 per cent in next two fiscals.

Reacting to lower growth projection,the BSE benchmark Sensex snapped its five-day winning streak and ended 85 points down at 17,622.45.

Agriculture and allied activities are likely to grow at 2.5 per cent in 2011-12,compared to a robust growth of 7 per cent in 2010-11,according to the Advanced Estimates released today by the Central Statistical Organisation (CSO).

Manufacturing growth is also expected to drop down to 3.9 per cent this fiscal from 7.6 per cent last year. Mukherjee attributed the the low numbers to slowdown in industrial output and investment growth.

“We shall have to give more focused to both on reaching the higher growth trajectory and at the same time to keep in mind that the inflation continue to be in moderate range,” Mukherjee said.

Experts said the dampener in economic growth is likely to make the RBI look at the option of rate cuts in near future.

“The high interest rates have acted as a dampener on the economy. It has increased the costs of borrowings and input prices and this has resulted in squeezed margin for the industry.

“With inflation showing some signs of moderation,the RBI is likely to go for rate cuts by April,” Deloitte,Haskins & Sells Director Anis Chakravarty said.

The latest GDP growth estimate of 6.9 per cent for the entire fiscal means that the pace of economic expansion slowed in the second half of 2011-12,given that GDP growth in the April-September,2011,period stood at 7.3 per cent.

“If industrial production picks off in the current quarter,then I will not be surprised if the final or revised estimate is 7 per cent or more than 7 per cent,” Prime Minister’s Economic Advisory Council Chairman C Rangarajan said.

However,despite the slowdown in economy the per capita income in the country is poised to rise by over 14 per cent this fiscal and stand at over Rs 60,000.