CMIE scales up GDP growth to 9.2%

Mumbai, Jan 16 (PTI) Even as the government andeconomists have started doubting the maintainability of thehigh growth rate in the second half of this fiscal due to thewayward inflation and slowing manufacturing, leading economicresearch agency CMIE has forecast that the economy will growby a robust 9.2 per cent.

"The economy is expected to better the H1 growth of8.9 per cent in H2. We expect a higher 9.7 per cent growth inH2, propelled by the farm sector coupled with the trade,transport, communications and hotel segments of the servicessector," Centre for Monitoring Indian Economy (CMIE) has saidin its monthly review of the economy for January.

It further said performance of the other segments ofthe services sector like finance, insurance and realty willalso improve on the back of strong credit off-take.

Driven by a robust growth in the first two quarters,the Finance Ministry had in December revised upward its growthprojection for the full fiscal to over 9 per cent, up from 8.5per cent it had projected in the Budget.

But it seems renewed optimism is losing its sheen asthe economy entered the last quarter, primarily because of thewayward ways of food inflation well as the headline inflation,driven by a massive rise in the prices of certain vegetableslike onions and tomatoes and the rising crude prices.

After touching an an "unacceptably high" 18.32 percent for the week ended December 25, food inflation dipped bya tad to 16.91 per cent for the week ended January 1. But thispushed up headline inflation which broke its downward trendfirst time in many months to 8.43 per cent in December, upfrom 7.48 per cent in November, forcing government to pressthe panic button to batten down price rise. .

Similarly, crude has been on the boil for quite some months, pushing up losses of oil marketers to nearly Rs 300crore per day. Crude prices topped USD 92 a barrel late lastmonth and still remain at over USD 90, forcing the governmentto abandon its plan to hike diesel prices last month. Crudeprice has been rising on the back of the speeding recoveryprocess of the Western economies.

Again, IIP numbers threw cold waters on growthoptimism unexpectedly, as factory production numbers came totrickle in November at 2.7 per cent, hitting an 18-month low.

Economists are worried if crude continued to rise itwill pose major challenges to the fiscal tightening measuresas India meets 80 per cent of its oil needs by imports.

CMIE pegged growth of farm and allied sector at arobust 5.1 per cent against a meagre 0.2 per cent it recordedin the last fiscal, following the worst drought in fourdecades in 2009. It bases its optimism on the extended monsoonthis year, which it says, will further help the Rabbi crops.

"We expect the major rabi crops to grow by 7.2 percent this fiscal, as against a 5.9 per cent decline recordedin the previous season," said the CMIE report.

"Foodgrain output is slated to see a 5.3 per centgrowth this fiscal, against 7 per cent decline last fiscal,while the allied sectors like livestock, forestry, fishing andlogging will maintain their normal growth of 2-4 per cent,taking the overall farm output to 5.1 per cent this fiscal."

However, the report does not see any improvement inthe performance of the industrial sector which was likely tomaintain its growth rate at last year''s level at 9.3 per cent.

The sector logged in a healthy 10.1 per cent in H1,powered by an 11.3 per cent uptick in manufacturing, comparedto 6.1 per cent in the same period last year. .

Construction sector, too, fared well in H1 with a 9.6 per cent growth against 8.4 per cent in the year-ago period,while mining and quarrying, power and gas, and water segmentsslowed down to 8.2 per cent, 4.8 per cent, respectively, from9.1 per cent and 7.1 per cent respectively last fiscal.

Services sector is projected to expand by 10.3 percent this fiscal, against 8.5 per cent last fiscal, led by thetrade and transport segments, says the report. Commodities arealso showing impressive growth numbers and is projected to login 10.5 per cent, in contrast to 7.2 per cent reported in theprevious fiscal and 6.3 per cent in the year before that.

The report noted that two major dampeners will be therailways and shipping and ports as they were hit by decline iniron ore exports and import and export of sugar.

But the report maintained that the other two areas ofthe transport sector, air and roads, will make up for thisdecline with impressive growth. In fact, the aviation sectorhas been witnessing one the best years in many a year with theApril-November traffic growth being over 25 per cent.

However, the report warned that "two factors can pulldown this projected high growth rate-inflation and theunseasonal rains in October and November. Higher inflation mayforce the Reserve Bank to up interest rates, while unseasonalrainfall has reportedly damaged corps in the affected states."

But the research agency quickly added, "we do notanticipate decline in GDP growth due to these factors thisyear." PTI BEN RSY