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India’s GDP to grow 7% in FY12, a tad above govt’s own advance estimate: CMIE

20 Feb 2012 Evaluate

The Centre for Monitoring Indian Economy (CMIE) has forecast India’s GDP growth for FY’12 to be 7% and 7.7% for FY’13. It also expects industrial production to grow by 7.4% in FY’13 as compared to 5.1% in FY’12. CMIE’s growth numbers for FY’12 are a tad more than the government’s advance estimate of 6.9%.

CMIE, in its February review of the economy has stated that GDP grew at a healthy pace of 7.3% till September 2011 after which it is expected to slow down because of domestic and global issues. A fall in production in the mining sector due to bans imposed in Karnataka and Goa, fall in production from Reliance Industries’ KG-D6 basin, and a drop in coal supply will lead to moderation of growth in the manufacturing sector to 4.9% in the second half of FY’12. The manufacturing sector, however, is expected to witness a healthy growth of 6.5% in FY’13.

The global crisis is also likely to impact India’s GDP numbers as exports are likely to witness a drop.  The banking and financial sector is expected to grow at a slower pace of 8.8% in FY’12 as compared to 10.4% in the last fiscal. This is expected to be on account of lower growth in credit off-take and higher cost of deposits.

In FY’13 industrial production is expected to grow by 7.4% as against the forecast of 5.1% for FY’’12. This growth is likely to be driven by over 10% rise in production of motor vehicles and other transport equipment, machinery, basic metals and wearing apparels. Rising corporate salaries, increase in rural income, softening of interest rates, improvement in availability of finance, new models and expansion of dealer’s network could boost passenger cars production by 13.1% in FY’13.

Further, production of Multi Utility Vehicles (MUVs), two-wheelers and three-wheelers is also expected to grow by around 10%. This will lead to higher demand and production in auto ancillary category. Huge capacity additions in the industrial and infrastructural construction segment and increase in production of automobiles and machinery is also expected to generate higher demand for basic metals in FY’13, states CMIE.

The mining industry, which saw a stagnation in FY 12, is also expected to grow by a healthy 5.6% next year. On the other hand, CMIE expects output of food products to remain flat, after growing by a smart 11.5% in the current year. The main culprit would be sugar, which accounts for over 20% of the total food and beverages production; its output is expected to fall by 2.8% in FY’13 due to fall in availability of sugarcane.

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