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India’s Q4 growth at 5.3%, lowest quarterly growth in 3 years

31 May 2012 Evaluate

The economy has grown by a mere 5.3% in the fourth quarter of 2011-12 - lowest quarterly growth rate in 3 years as against 7.8% in the same quarter last year. It is much below the expected number of 6.1% and the major dampening has come in from the manufacturing sector. For the entire year, the GDP growth has now been revised to 6.5%. For the fourth quarter, services grew 7.9% compared to 10.6% last year, farm sector growth fell to 1.7% from 7.5%, manufacturing sector logged negative growth of 0.3% against 7.6%, and construction sector growth fell to 4.8% from 8%.

As stated earlier there has been a downward revision of GDP numbers for FY12. As per the Central Statistics Office (CSO), the downward revision has come in because of the lower performance in manufacturing and 'trade, hotels, transport and communications' than expected.

For 2011-12, the revised GDP growth estimate has taken into account the agricultural growth at 2.8%, higher than the level of 2.5% at the advance estimate stage. The manufacturing sector output is pegged at 2.5%, lower than the 3.9% growth put out at the advance estimate stage. Construction sector is now estimated to have grown 5.3% in 2011-12, higher than 4.8% estimated earlier in February this year.

With the numbers coming in lesser than expected the focus has again shifted towards the RBI’s monetary policy. C Rangarajan, chairman, Prime Minister’s Economic Advisory Council has stated that the RBI shall continue to focus on inflation and may not go in for another rate cut. Some economists on the other hand, feel that inflation probably has now bottomed out and the RBI should focus on reviving growth. Economists are also now less enthusiastic about the GDP numbers of the current fiscal and feel that they will hover around the 6% mark.

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