India's GDP growth to slip below 7% in FY12: CRISIL

CRISIL Research has come out with its report on "Growth slips below 7% in FY 12" based on the advanced GDP estimates for the current fiscal put out by the Central Statistical Organization, Government of India.

India's GDP growth for the first time after the global crisis of 2008 will slip below 7 per cent. Central Statistical Organisation (CSO) has pegged GDP growth for FY12 at 6.9 per cent. As the GDP growth during first-half of FY12 stands at 7.3 per cent, GDP growth in the second half will be lower than the first half. Hit by the global headwinds and high interest rates industry is expected to grow at 3.9 per cent in FY12. However, services sector growth is expected to do well and is pegged at 9.4 per cent for FY12. On the demand-side, due to high interest rates and poor sentiments both consumption and investment growth is expected to decline but the decline will be more pronounced in case of investment growth which is expected to fall from 7.5 per cent in FY11 to 5.6 per cent in FY12. Lower GDP in FY12 clearly is an outcome of a combination of domestic (policy log-jam, high interest rates, stubborn inflation) and global (sovereign debt crisis in EU) factors. Going forward though we expect inflation and interest rates to ease, global environment still looks uncertain. Hence, we expect GDP in FY13 to grow at 7.0 per cent.

Agricultural output growth is expected to decline to 2.5 per cent in FY12 from 7.0 per cent in FY11, mainly due to high base of last year. In absolute terms though agricultural output is expected to reach record levels as after kharif now even rabi harvest is likely to be good.

Plagued by high interest rates and slowing economy manufacturing sector growth is expected to decline to 3.9 per cent in FY12 from 7.2 per cent in the previous quarter. On the other hand, mining sector which faced regulatory hurdles and also ban on iron ore mining in few sates is expected to witness a contraction of 2.2 per cent in FY12 as compared to 5.0 per cent growth in FY11. However, electricity sector did rather well and is expected to record a growth of 8.3 per cent in FY12 as compared to 3.0 per cent in FY11.

Services have been the most resilient sector of the Indian economy and the same is once again demonstrated by its performance in FY12. It is expected to grow at 9.4 per cent in FY12. Within services, trade, transport and communication grew the fastest at 11.2 per cent in FY12 as against 11.1 per cent in FY11.

Hit by high inflation and decline in demand in interest-sensitive sectors, private final consumption expenditure, the largest component of aggregate demand, is expected to moderate to 6.5 per cent in FY12 from 8.1 per cent in FY11.

Disclaimer: CRISIL Limited has taken due care and caution in preparing this Report. Information has been obtained by CRISIL from sources, which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL Limited has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this Report. The Centre for Economic Research, CRISIL (C-CER) operates independently of and does not have access to information obtained by CRISIL's Ratings Division, which may in its regular operations obtain information of a confidential nature that is not available to C-CER. No part of this Report may be published / reproduced in any form without CRISIL's prior written approval.

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