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New Delhi: In line
with fears voiced by India Inc, the country's economic growth
retarded to the slowest pace in two years, at 6.9 percent for the
quarter ended September, with an abysmal expansion in
manufacturing and a decline in mining output.
Amid global economic slowdown coupled with high domestic
inflation, steep interest rates and poor demand, the growth in
manufacturing was just 2.7 percent, against 7.8 percent in the
like period of last year, fresh data on gross domestic product
showed Wednesday.
The overall growth during July-September was the lowest since the
6.3 percent expansion in the April-June quarter in 2009. The
Indian economy had expanded by 7.7 percent in the quarter ended
June and 8.4 percent in the like period of the previous fiscal.
"Had it been 10 years ago, this would have elated me. But today, I
cannot have that satisfaction because we had reached higher
trajectory of growth -- from there we are slipping," Finance
Minister Pranab Mukherjee told reporters here.
"Nonetheless, we shall have to try to face the situation and to
see what best we can do at this given situation," the finance
minister said, reacting to the latest numbers on India's GDP, even
as industry said their fears have been proved right.
As per the data released by the ministry of statistics and
programme implementation, the agriculture output rose 3.2 percent
in the July-September quarter, against 5.4 percent in the like
period of last fiscal.
Mining output, in fact, declined 2.9 percent against 8 percent.
The construction sector, too, registered a retarded growth of just
4.3 percent against 6.7 percent, while the financial, insurance,
real estate and other business services grew at a healthy 10.5
percent against 10 percent.
The electricity and gas sector also rose reasonably well at 9.8
percent, while hotels, transport and communication business
reported a 9.9 percent increase in output.
Reacting to the numbers, industry felt the tight monetary policy
for the past two years, which was adopted in a bid to tame the
stubbornly-high inflation, had made growth a casualty, with
companies also forced to borrow at high interest rates.
"Today's GDP growth figure for Quarter-II at 6.9 percent is only
an official vindication of the weakness already apparent in the
industrial sectors," said Chandrajit Banerjee, director-general,
Confederation of Indian Industry (CII).
"With high cost of money, owing to 13 consecutive rate hikes by
the Reserve Bank, the cost of capital in India is one of the
highest in the world -- and only some strong positive developments
would induce industry to invest."
The Associated Chambers of Commerce and Industry (Assocham),
another leading corporate lobby, felt the slowdown in
manufacturing may also cascade to other sectors and called for a
successive reduction in interest rates to bring down borrowing
costs.
"The escalating debt crisis in Europe and nervous economic
recovery in the US are likely to hit the services sector in India,
which contributes to over 60 percent of the GDP," the chamber
said.
"Even the faltering manufacturing sector -- a major contributor to
industrial production -- is expected to hit the services in third
quarter."
The Federation of Indian Chambers of Commerce and Industry (Ficci)
now estimates India's growth for this fiscal at 7-7.1 percent.
"Given the first half growth of 7.3 percent, it is amply clear
even the 7.6 percent forecast by RBI is clearly on the higher
side."
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