Economic growth sputtered to a decade low of 4.5 per cent in FY 13, lower than the earlier forecast of 5 per cent, as both manufacturing and farm sectors performed worse than expected. This is the slowest growth since FY 03 when the GDP grew at 4 per cent.
“Gross domestic product at factor cost at constant prices in 2012-13 is estimated at Rs 54.8 lakh crore as against Rs 52.5 lakh crore in 2011-12 registering a growth of 4.5 per cent during the year,” the Central Statistics Office said in its first revised estimate of national income released on Friday.
As a result of the slowing economy and high inflation, India’s real per capita income also remained almost flat at Rs 38,856 for FY 13 as against Rs 38,048 in 2011-12, rising by just 2.1 per cent, against an increase of 5.1 per cent during FY 12. According to the CSO, the secondary sector grew at 1.2 per cent as against the previous forecast of 2.3 per cent while the primary sector too expanded at a slower than estimated rate of 1 per cent against the earlier estimate of 1.6 per cent, which was based on advance indicators.
“The fears of distress in the manufacturing sector have turned into reality. The downward revision in GDP is not so surprising as the industrial sector has borne the brunt of complete government inaction, a tight monetary policy and a turbulent external economy,” Sunil Sinha, director (public finance), India Ratings, said.
C Rangarajan, chairman of the PM’s Economic Advisory Council, however, said the GDP numbers would be scaled up once data from the Annual Survey of Industries is considered. “Just like the GDP data for FY 12 has been revised upwards, the growth numbers for last fiscal too will improve. Same will be the case for the current fiscal, where growth is likely to be around 5 per cent,” Rangarajan told The Indian Express.
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In its second revised estimate for FY 12, also released on Friday, the CSO scaled up the growth number to 6.7 per cent from the previous forecast of 6.2 per cent. However, in its third revised estimate for FY 11, the CSO brought down the GDP growth figure to 8.9 per cent from the earlier estimate of 9.3 per cent.
Advance estimate of national income for FY 14 will be released on February 7. GDP growth is expected to be subdued at about 4.8 per cent. For the first revised estimate, the CSO uses the growth rate of the index of industrial promotion to collate manufacturing sector growth, instead of provisional IIP data that is used as an input in the advance forecast that was released in May 2013. The first revised estimate uses data from the Annual Survey of Industries.
Reflecting the underlying structural weaknesses, the data also revealed lower than estimated growth numbers for exports, capital investment and consumption sectors. High inflation coupled with the economic slowdown also led to a decrease in the rates of growth of gross domestics savings and of gross capital formation.
Gross domestic savings at current prices in FY 13 grew to Rs 30.4 lakh crore as against Rs 28.2 lakh crore in FY 12, constituting 30.1 per cent of GDP at market prices as against 31.3 per cent in the previous year. “The decrease in the rate of savings has mainly been due to the decrease in the rates of savings of household sector in physical assets and private corporate sector,” the CSO said.
Similarly, the rate of gross capital formation (including valuables) at current prices was 34.8 per cent in 2012-13 as against 35.5 per cent in 2011-12. Private final consumption expenditure remained flat at Rs 57.7 lakh crore in 2012-13 as against Rs 51.4 lakh crore in FY 12, registering a growth of 57.1 per cent.