India’s fourth quarter GDP grows at 5.3%, 6.5% for FY 12

NEW DELHI: India’s Gross Domestic Product (GDP) grew at a mere 5.3 per cent in the fourth quarter of the financial year as against 7.8 per cent in the same quarter last year.
Growth hit a nine year low as the manufacturing sector contracted and a fall in the rupee to a record low suggests the economy remains under pressure in the current quarter.
GDP for the September to December 2011 quarter grew at 6.1 per cent. The GDP growth rate was drastically below the consensus estimates of 6.1 per cent.
The GDP growth rate for FY12 dropped to 6.5 per cent versus a robust 8.4 percent in FY11.
While the growth in the manufacturing sector fell to 0.3 per cent in Q4 as against 0.4 per cent in Q3, the growth in the construction sector also dipped at 4.8 per cent versus 7.2 per cent in Q3. The financial services sector of the economy belied trend and grew at 10 per cent versus 9 per cent in the third quarter.
According to the figures released by the government, the FY12 revenue gap stood at Rs 3.847 lakh crore versus Rs 3.949 lakh crore in the previous year. The FY12 fiscal deficit was at 5.8 per cent of the GDP as against the budget aim of 5.9 per cent.
Commenting on the disappointing numbers, Taimur Baig of Deutsche Bank told ET Now that with inflation high, he did not expect much action in the monetary policy review in June. He emphasised the need to revive expectations.
Sajid Chinoy of JP Morgan expressed concern over both the pressures from Europe which might have a spillover affect and the supply side constraints that have developed in some sectors in the economy. “Investor confidence will return if twin deficits are dealt with,” he told ET Now.
C Rangrajan, Chairman of PMEAC said, “Obviously it is a disappointing one. Decline in industrial production has not been offset by growth in agri production. Going ahead we can still expect 6.5-7% as agri is likely to do well with expectation of a good monsoon, manufacturing will rise from a low base and service sector will record decent growth.”
He said that the government has in principle decided to correct diesel prices but the actual decision is influenced by political considerations. However he added that in the course of the year steps will be taken to control subsidies to keep the fiscal deficit in check.
Pronab Sen, principal advisor, Planning Commission told ET Now that not enough action had been done on the fiscal policy front and that there was a need to change that.
A slew of banks and economists cut their growth forecasts of the Indian economy for the financial year 2012-13.
They are worried that a lethal cocktail of poor macro indicators and an environment of policy drift has cast a darker shadow on the economy than previously thought.