7.2 growth rate may put govts exit from stimulus on fast track

Despite a poor show by the agriculture sector this year,the economy is expected to grow at over 7 per cent during the...

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Despite a poor show by the agriculture sector this year,the economy is expected to grow at over 7 per cent during the current financial year,states the Central Statistical Organisation CSO. The reaffirmation of the view that India is returning to the trajectory of high growth rate gives the government leeway to start looking at ways to withdraw huge stimulus packages it had doled out in the last couple of fiscal years to prop up growth.

Given the fact that there is a decline in agriculture growth rate,the economy is still expected to grow at 7.2 per cent. This is quite encouraging. The government should now gradually withdraw stimulus and the process of fiscal consolidation must start by this years budget, said C Rangarajan,chairman of the Prime Ministers economic advisory council.

While the overall growth rate projected by the CSO is a tad lower than the Reserve Banks 7.5 per cent,the finance ministry is hopeful of better numbers by the end of the fiscal. This is an advance estimate. What we normally see when the final numbers come out for the third and fourth quarters is that there would be an upward bias,and we are sure the same is going to happen this time as well, said finance secretary Ashok Chawla.

The CSO states that the economy is likely to attain a growth rate of 7.2 per cent during the financial year 2009-10 compared with 6.7 per cent registered in the previous year. The important jump of 50 basis points in the economic growth is mainly due to the strong performance shown by the non-agriculture sector. Various sectors like mining and quarrying,manufacturing,electricity,gas and water supply,construction,trade,hotels,transport and communication,financing,insurance,real estate and business services,and community,social and personal services have grown by more than 5 per cent during the year.

The agriculture sector,on the other hand,is expected to witness a negative growth of 0.2 per cent during the fiscal surprising economists that expect a fall of at least 2 per cent for the sector. In contrast,agriculture had grown by 1.6 per cent during the last fiscal year. Even I was surprised with the numbers. These numbers take into account the area under cultivation and do not give a measure of yield. It is possible that our advanced estimates for agriculture might see a downward revision later. However,I do not expect the overall GDP growth to slip below 7 per cent, said Pronab Sen,chief statistician officer.

Apart from this,the CSOs advance estimates also project a 9 per cent jump in the annual pay at Rs 43,749 in 2009-10 compared with last fiscal,if the national income were evenly distributed among the citizens. The per capita income,an indicator of collective prosperity,was Rs 40,141 in 2008-09,higher by 13.3 per cent recorded in the year ago period.

The lower growth rate in 2009-10 is partly because of poor exports as outward shipments add to the net national income while imports reduce it. Contribution of exports to the economic expansion during 2009-10 is estimated to fall to 18.6 per cent from 23.5 per cent a year ago.