The Hindu Business Line : GDP grows at 7.6% in July-Sept

New Delhi, Nov. 28 The Indian economy grew by only 7.6 per cent during July-September, down from the 9.3 per cent for the corresponding quarter of 2007-08.

However, this is better than the 6.5-7 per cent range forecasts of most analysts and rating agencies.

For the first half of 2008-09, GDP growth was 7.8 per cent, against a corresponding year-on-year increase of 9.3 during April-September 2007-08. These data do not capture the developments since October. The last two months have seen a sharp contraction in economic activity as a direct consequence of the global credit crunch.

Mr D.K. Joshi, Principal Economist at the rating agency, Crisil Ltd said he expected a slowdown to happen in the second half, which will pull down the growth for the entire fiscal at between 6.5 to seven per cent”. Crisil had earlier projected a 6.9 per cent growth for the latest ended quarter.

The better-than-expected second quarter growth was mainly on account of construction and services. The buoyancy in these two sectors helped offset the deceleration clearly evident in industry, with manufacturing and electricity seeing a near halving of growth rates.

According to Mr Joshi, the coming slowdown will specially manifest itself in the ‘trade, hotels, transport and communication’ sub-sector, which grew by 10.8 per cent in July-September, on top of 11 per cent during the same quarter of last year.

The Finance Minister, Mr P. Chidambaram, told reporters that the Government “will not let the GDP growth fall below seven per cent”, while describing the 7.8 per cent figure for the first half as “healthy and satisfactory”.

The Chief Economic Adviser, Dr Arvind Virmani, too, expressed confidence that the GDP “will grow by 7.5 to eight per cent during the current fiscal and the growth momentum would be maintained next year”.

Mr Chidambaram, however, admitted to a slowdown in manufacturing. The Government, he said, was looking to address problems specifically of textiles, automobiles, real estate, hotel, gems and jewellery, marine products and financial services industries.

The Central Statistical Organisation’s (CSO) data show continuing buoyancy in investment. The ratio of gross fixed capital formation to GDP at constant prices for July-September 2008 at 35.3 per cent, up from 32.3 per cent and 33.4 per cent for the preceding two quarters.

“As long as investment takes place, I am confident that the second half of this fiscal will return a satisfactory growth rate”, Mr Chidambaram added.