New Delhi, (IANS) 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.”