The Hindu Business Line : Centre ups GDP estimate to 9%

New Delhi, May 30 The Centre has revised upwards its estimate of growth in the gross domestic product (GDP) for 2007-08 to 9 per cent, from the earlier 8.7 per cent.

The higher number is being ascribed to a better-than-expected performance of the farm sector.

According to ‘revised estimates’ of national income for 2007-08, released by the Central Statistical Organisation (CSO) here on Friday, agricultural growth at 4.5 per cent turned out to be more than the 2.6 per cent rate in the ‘advance estimate’ of February 7. This follows a bumper crop year that saw production of rice, wheat, maize, soya bean, cotton and pulses touch all-time highs.

At the same time, the growth rate for industry has been revised downwards from 8.6 per cent to 8.1 per cent, with the revision being particularly sharp in the case of manufacturing (from 9.4 to 8.8 per cent) and electricity, gas and water supply (from 7.8 to 6.3 per cent), even as the estimate for mining and quarrying is now assessed at 4.7 per cent (against 3.4 per cent).

The services sector’s growth has been marginally upped, at 10.7 per cent, from the advance estimate of 10.6 per cent.

There have been upward revisions in the figures for construction (from 9.6 to 9.8 per cent), financing, insurance, real estate and business services (from 11.7 to 11.8 per cent) and community, social and personal services (from 7 to 7.3 per cent) and a slight lowering for trade, hotels, transport and communication (12.1 to 12 per cent).

Dream run

On the whole, the period from 2003-04 to 2007-08 marks a five-year dream run unprecedented in India’s recorded economic history, with an annual average GDP growth rate of 8.8 per cent.

Speaking to newspersons here, the Union Finance Minister, Mr P. Chidambaram claimed that “there is no reason for growth to fall below 8.5 per cent in 2008-09”.

Rising investment rates

He also highlighted the rising investment rates during the tenure of the United Progressive Alliance regime. The ratio of gross fixed capital formation to GDP, which stood at 23.80 per cent in 2002-03, has steadily increased to 24.94 per cent in 2003-04, 28.41 per cent in 2004-05, 30.98 per cent in 2005-06, 32.48 per cent in 2006-07 and 33.91 per cent in 2007-08.

All this has, of course, been partially dented by a resurgence of inflation in the last two-three years, which, Mr Chidambaram admitted, was ‘worrisome’. But inflation apart, there are worries building up even on the growth front.

Blips on radar

The CSO data show that GDP growth rates during the last two quarters of 2007-08, at 8.8 per cent each, had fallen below the 9.2 per cent and 9.3 per cent levels for April-June and July-September 2007, respectively. More significantly, manufacturing growth has slowed down to a mere 5.8 per cent in the last quarter, against 9.6 per cent, 9.2 per cent and 10.9 per cent in the preceding three quarters.

The Finance Minister promised that the Government will take ‘corrective steps’ to address the slowdown in manufacturing and “we will work closely with industry in this regard”.

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