GDP to slow in FY08; but FM sees better days

The Indian economy is expected to slow in the current fiscal year as a series of monetary tightening steps coupled with the rupee's appreciation has hurt consumer and industrial demand in Asia's fourth-largest economy. The GDP for the year ending March 31 is estimated to grow at 8.7%, the Central Statistical Organisation (CSO) said. This is much lower compared to the 9.6% growth rate of the previous financial year. The advance estimate for FY08 is in line with average forecast of economists, but is a little higher than the 8.5% projected by the Reserve Bank of India (RBI).

The manufacturing sector is expected to grow by 9.4% versus 12% in the previous fiscal year. The construction sector is also likely to witness a drop in its growth rate at 9.6% as against 12% last year. Growth in electricity, gas and water supply is likely to be higher at 7.8% compared to 6% last year. Trade, hotels, transport & communication will grow by 12.1% as against 11.8% in FY07. Finance, insurance, real estate & business services' growth will slow to 11.7% from 13.9% in the previous fiscal year. The agriculture sector is likely to show a growth rate of 2.6% in its GDP during 2007-08 as against 3.8% in the previous fiscal year.

Reacting to the advance estimates of national income, Finance Minister P. Chidambaram said he was confident that the Indian economy will grow at close to 9% rate this fiscal. "I am reasonably confident that figures may be revised and economy will grow at close to nine per cent," Chidambaram said. "The CSO figures are lower than what I had anticipated. We are disappointed but not despondent," he said. Poor figures are mainly because of projected low rate in the agriculture sector, Chidambaram said, adding that like all estimates, these will also be revised upwards.