New Delhi, Nov 30 (UNI) Gross Domestic Product (GDP) in July-September, 2007, grew by 8.9 per cent as compared to 10.2 per cent during the same period last year, despite respectable high growth of the agriculture and services sector.
The farm sector expanded by 3.6 per cent in July -September, 2007, a little close to previous years quarter growth of 3.8 per cent. Services grew at an annual rate of 10.2 per cent during the quarter as compared to 11.1 per cent during the same period last year.
The downside to the growth figures was the slowdown of the manufacturing sector, which clocked 8.6 per cent in July-Sept this year as compared to 12.7 per cent in the corresponding quarter last year.
The main reason for the decline in the manufacturing was largely attributable to the slowdown in the consumer durable sector.
However, the two other components of industrial production, namely mining and quarrying, and electricity, gas and water supply recorded a growth rate of 7.7 per cent and 7.3 per cent respectively. The comparative figures for last year were 3.9 per cent and 8.1 per cent respectively.
While, manufacturing was responsible for the high growth of industrial production during the last four years, the groups electricity and mining had been the laggard sectors. The apple cart seems to have been reversed, with the analysts attributing the slowdown in manufacturing to a number of factors.
These include the tight monetary policy of the Central Bank, high global crude prices, appreciating rupee hitting exports and the perception that the global economy, including the United States economy, is likely to slowdown.
A worried Central Bank has perhaps been too hawkish in its attempt to control inflation and consequently sucked out excess liquidity.
It raised interest rates five times between mid-2006 and March this year, but left them unchanged at its last review of the Annual Credit Policy in October.
Finance Minister P Chidambaram expressed satisfaction at the economy clocking 8.9 per cent and exuded confidence that the year will end with a growth rate of 9 per cent.
He, however, played down the slowdown from the first quarter and Q2 of 2006-07, saying ''we are not planning a double digit growth this year.'' The Finance Minister was also of the view that investment will continue to be a driver of growth with Gross Fixed Capital Formation(GFCF) higher by 30.3 per cent.
The other factor which were indicative of higher growth in the remaining part of the fiscal according to Mr Chidambaram were: buoyancy of the capital goods sector, robustness in the growth rate of the construction sector, private consumption expenditure recording a 5.7 oer cent growth and decent growth of the group mining and electricity.
Mr Chidambaram also forecast that inflation will remain at the current level of 3.2 per cent, vowing that both the Reserve Bank of India and the Government would not hesitate to take further steps to check prices.
Transport, communications, trade and hotel sectors slowed down to 11.4 per cent in the second quarter from 14.2 per cent a year ago.