India's GDP to grow at 6.9% in FY12 as per CSO estimates

India’s gross domestic product (GDP) likely to grow by 6.9% in the fiscal year 2011-2012 according to advance estimates released by the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation. The GDP growth numbers are a tad less than the widely expected figure of around 7%.

The ‘agriculture, forestry and fishing’ sector has grown by a meager 2.5 % registering a sharp decline from the 7% registered in the corresponding period last year. Production of foodgrains is expected to grow by 2.3% as compared to 12.2% growth in the previous agriculture year. The  production of cotton  and sugarcane  is also expected to rise by 3.3% and 1.6%, respectively, in 2011-12. The number has come as a slight surprise given that India has had two consecutive years of good rains and bumper production of rice, wheat and cotton. These figures could impact future inflation numbers leaving little room for monetary intervention by RBI. 

The manufacturing sector is likely to grow at a slow rate of 3.9% during 2011-12 sharply down from its  growth of 7.6% during 2010-11. The major dampener has come from the mining sector which is likely to show a negative growth of  2.2% in 2011-12 as against growth of 5% during 2010-11. The construction sector is likely grow at a rate of 4.8% during 2011-12 as against growth of 8% in the previous year. Furthermore, the finance, insurance, real estate and business services sectors are likely to grow by 9.1% this fiscal, against 10.4% last fiscal. These numbers have been pretty much in line with expectations. A sharp decline in the manufacturing can be attributed to the ban on mining in some states and slowdown in the global economy.

The services sector comprising of trade, hotels, transport and communication is expected to grow at  11.2% during  2011-12 as against growth of 11.1% in the previous year. The per capita income in real terms (at 2004-05 prices) during 2011-12 is likely to attain a level of Rs. 38,005 as compared to the Quick Estimate for the year 2010-11 of Rs. 35,993. The growth rate in per capita income is estimated at 5.6% during 2011-12, as against the previous year's estimate of 6.4%. Population during this period has grown from 1.8 billion to 2 billion.

Private final consumption expenditure (PFCE), regarded as the driver for growth, grew by 6.4% as compared to 8.1% in 2010-11. It is estimated at Rs. 32,70,368  crore  in 2011-12 as against Rs. 30,72,115 crore in 2010-11.

Gross fixed capital formation (GFCF), an indicator of investment, grew at an estimated 5.6% in 2011-12 as compared to 7.5% in 2011-2010. A slowdown in GFCF could be attributed to the tightening of the monetary policy by RBI, policy paralysis on the government’s front and the euro zone crisis. Government final consumption expenditure (GFCE), is likely to grow by 2.8% in 2011-2012 as compared to 7.9% in 2010-2011.