India's official estimates on Monday pegged the economic growth during 2009-10 at 7.2 per cent, which fell short of the optimistic projections of the Reserve Bank of India and finance ministry, though higher than 6.7 per cent a year ago.
According to advance estimates released by the Central Statistical Organisation, farm output is estimated to contract by 0.2 per cent and services to record moderate growth. Manufacturing, however, is estimated to grow by a robust 8.9 per cent this fiscal, which may prompt the government to withdraw stimulus in a phased manner.
Bolstered by stunning 7.9 per cent growth in the second quarter of this fiscal, the finance ministry in its mid-term review had projected the economy to grow by 7.75 per cent this fiscal and the Reserve Bank had pegged it at 7.5 per cent.
"We should say stimulus has succeeded and we should begin to phase it now," Planning Commission deputy chairman Montek Singh Ahluwalia told reporters.
However, finance secretary Ashok Chawla evaded a direct reply.
"In terms of what the future policy framework is going to be, I think you will have to wait for the Budget," he said.
According to CSO, farm and allied activities are pegged to shrink by 0.2 per cent this fiscal against 1.6 per cent growth a year ago.
The output is likely to decline because of fall in Kharif production on account of drought and floods that hit several parts of the country.
The estimated growth this fiscal will be driven by robust manufacturing sector expansion against 3.2 per cent in FY'09.
The sector had got various stimulus doses from the government in the wake of global financial crisis.
According to the advance estimates, mining and quarrying is likely to grow by 8.7 per cent compared with 1.6 per cent a year ago, while electricity, gas and water supply by 8.2 per cent against 3.9 per cent.
Trade, hotel, transport and communication is also estimated to rise by 8.3 per cent against 7.6 per cent last year and construction by 6.5 per cent in FY'10 from 5.9 per cent in FY'09.
However, other services like financing, insurance, real estate and business services are likely witness fall in expansion and grow by 9.9 per cent this fiscal against 10.1 per cent last fiscal and community social and personal services by 8.2 per cent compared with 13.9 per cent.
Yes Bank chief economist Shubhada Rao said: "(CSO estimates are) slightly lower than expected. The performance of the services sector has not been up to the mark. But surprisingly there is shallower contraction in the agriculture sector."
She expected a possibility of upward revision of GDP because of likely revision in growth in the services sector.
However, farm is likely to deteriorate further she said. On dip in services growth, the Finance Secretary Ashok Chawla also said the final figures would be better than those put out by advance estimates.
Advanced estimates are released before the end of a fiscal year to enable the government calculate various figures like fiscal deficit in the Budget.
The stock markets initially reacted negatively to the data with the benchmark index Sensex falling over 200 points after the advance estimates were released.
However, it later bounced back and was trading at over 100 points from Friday's close.
These advance estimates are calculated on the new base year of 2004-05, than 1999-2000 as was the practice earlier.
As such, the government will get statistical advantage of revising down fiscal deficit at 6.5 per cent of GDP than budget estimates of 6.8 per cent as size of the economy is pegged higher at Rs 61,64,178 crore (Rs 61,641.78 billion) this fiscal.
CSO has full actual data for the first half, partial data for the third quarter, and no actual data for the Q4, while putting out advance estimates.
That is why, the final numbers under go some revision from the advance estimates. While Chawla expect higher final numbers, GDP growth, in fact, was revised downward to 6.7 per cent last fiscal from 7.1 per cent projected in the advance estimates.
Even as estimated 7.2 per cent growth rate for this fiscal is lower than RBI's and finance ministry's projections, the second half is estimated to grow at higher rate than seven per cent recorded in the first half.
This is despite the fact that RBI and other economists project economy to register lower growth in the Q3 than the stunning 7.9 per cent in the second quarter.
Chief economic advisor said, "It (advance estimates) portrays, it confirms, what earlier was matter of speculation that India has clearly turned from the downturn."
Ahluwalia said it was his consistent view that economy is back on seven per cent plus growth rate.
He expected economy to clock better growth rate of 8 per cent next fiscal. As per advance estimates, per capita income is estimated at Rs 43,749 crore (Rs 437.49 billion) during 2009-10 compared to Rs 40,141 crore (Rs 401.41 billion) during 2008-09, showing a rise of nine per cent.
