A sharp slowdown in construction activity has pulled down economic growth to below 8 per cent in the first quarter of the current fiscal.
The country's real gross domestic product (GDP) grew by 7.7 per cent during April-June against a year-on-year increase of 8.8 per cent in the same quarter of 2010-11.
The lower growth has come despite agriculture turning out a better performance on the back of a bumper Rabi crop and various commercial, financial and business-related services also doing reasonably well. Even electricity and other utilities recorded higher production increase relative to last year's corresponding quarter.
While the Finance Minister, Mr Pranab Mukherjee, said the latest GDP numbers were “no doubt disappointing”, his Chief Economic Advisor, Prof Kaushik Basu, felt that economic growth may not be on the higher side even in the second quarter. He was, however, optimistic of a “substantial pick-up” in the second half of the fiscal.
The real laggard was construction that returned a measly 1.2 per cent growth during the latest ended quarter, compared with 7.7 per cent in April-June 2010. Manufacturing, mining, and assorted public and personal services, too, posted lower growth, though these are not as worrying as the deceleration seen in construction.
“The key indicators of construction sector, namely, production of cement declined by 0.9 per cent and consumption of finished steel registered growth rate of 1.5 per cent, during Q1 of 2011-12,” the Central Statistics Office said in its statement issued here on Tuesday.
Equally disconcerting is the first-quarter data pertaining to the ‘expenditure' side components of GDP.
Gross fixed capital formation (GFCF) – a measure of investment taking place in the economy – has registered a year-on-year increase of 7.9 per cent in real terms during April-June 2011, which is less than the 11.1 per cent for the same quarter of last fiscal.
The growth in private final consumption expenditure (PFCE) has, likewise, slipped from 9.5 per cent to 6.3 per cent. The slowdown in spending (both investment as well as private consumption) is also apparent from their growth computed at current prices.
By this measure, the growth in GFCF during the first quarter of this fiscal was only 14.2 per cent (against 18.5 per cent in April-June 2010), with these working out to 16.3 per cent (21.2 per cent) for PFCE.
As a percentage of GDP at current prices, GFCF has reduced from 29.2 in April-June 2010 to 28.4 in April-June 2011, while correspondingly falling from 58.7 to 58.1 for PFCE.
Industry chambers were less upbeat. The Secretary-General of FICCI, Dr Rajiv Kumar, projected GDP growth for 2011-12 “in the lower band of 7.5-8 per cent with some significant downside risks”.