GDP growth seen dipping to a 3-year low of 6.9%

New Delhi: India's economy is expected to grow by 6.9% in 2011-12, the slowest pace of expansion in three years, dragged down by sluggish industrial growth and a decline in the mining sector. 

    Data released by the Central Statistics Office on Tuesday showed that growth in 2011-12 is estimated to be a shade below the 7-7.5% being projected by policymakers 
and below the 9% estimated last year. This is the slowest pace of growth since the 2008-09 global crisis which pushed down India's gross domestic product growth to 6.7%. But the economy recovered and grew 8.4% in 2010-11. GDP numbers may pick up, says FM 
New Delhi: The Indian economy, Asia's third-largest, has been hit by stubbornly high inflation, high interest rates, a slowing global economy and policy paralysis in the aftermath of a slew of scandals that emerged last year. Tuesday's CSO data showed that the key farm sector is estimated to grow by 2.5% in 2011-12, lower than the 7% posted in the previous year and below policymakers' expectations. A slowdown in investments hurt manufacturing growth, which is expected to ease to 3.9% in 2011-12 compared to 7.6% in the previous year. 
    The mining and quarrying sector emerged as a laggard and is expected to decline 2.2% in 2011-12 compared to a growth of 5% in the previous year. The sector has been hit hard by policy delays and implementation of projects. The construction sector is estimated to grow 4.8%, slower than the 8% registered in 2010-11. Overall, the services sector, which accounts for more than 55% of the economy, is expected to grow by 9.4% in 2011-12, nearly similar to the 9.3% growth in 2010-11. 
    Finance minister Pranab Mukherjee said though the advance estimates for GDP for the current fiscal year looked somewhat disappointing, given the recent growth experience, the figure was not all that surprising considering the current global context and the slowdown in the domestic industrial sector. He said there had been some encouraging signs in recent weeks on business sentiments, rupee exchange rate, moderation in headline inflation, possibility of a bumper rabi crop, and continued strong performance of the service sector which should help in recovering the growth momentum. 
    The finance minister said he anticipated an upward revision in the GDP numbers when the full data for 2011-12 becomes available. Analysts say the Budget, which will be presented in Parliament on March 16, will hold the key to reviving sentiment and boosting growth. C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, said he expected growth in 2011-12 to be around 7% as industrial output was expected to gather pace. "My own estimate is that it would be around 7%. However, there is still a possibility that when the revised estimate comes, it will be slightly higher. Growth will be around 7% or a little above 7%," he said. 
    Some economists said they expected growth to pick up in the months ahead on the back of an improving policy scenario, slowing inflation and expectations of lower interest rates. "Looking ahead, we expect real GDP growth to rise to 7.4% yearon-year in FY13 from 6.9% in FY12. High interest rates and elevated inflation—the two key headwinds to growth—should turn tailwinds this year. Government policy remains a joker in the pack," Sonal Varma, analyst at Nomura, said in a research note.