Govt forecasts FY09 GDP growth at 7.1 per cent

New Delhi: The Central Statistical Organisation (CSO) has released its GDP growth forecast for the year FY2008-09 at 7.1 per cent. The GDP growth estimate is down from 9 per cent year-on-year (YoY).

"The GDP (forecast) growth numbers indicate room for optimism. I see interest rates softening ahead," Arun Ramanathan, Finance Secretary, said.

"It is a pleasant outcome because people were afraid that the current year might be lower and the fact that it (the growth forecast) has come in at 7.1 per cent is a positive development," Montek Singh Ahluwalia, the Deputy Commissioner of the Planning Committee, said.

Ahuwalia added that usually the government indicates the outlook for the next year during the Budget. "I am sure that when the vote on account is presented, you will get some indication (for the growth outlook next year)."

Reacting to the growth forecast, Jehangir Aziz, Chief Economist, JP Morgan, said demand in the economy would get constrained going forward. "These are surprisingly high numbers, from my point of view, but these are early estimates and I would still look for what has happened in Q3 and Q4 of the fiscal but unfortunately we will have to wait for some time before those numbers come around," he said.

On industrial growth being scaled down by the CSO to 4.8 per cent from 8.1 per cent YoY, Aziz said, "I would expect industrial growth to trend lower back to about three per cent for the year as a whole."

He added, "We know it was about 4 per cent–5 per cent in the first half of the year. Then we have the index of industrial production (IIP) data for October and November and that was -0.4 and 2.4. So you wouldn’t see close to five per cent growth pan out in FY09," he said.

"Manufacturing will be the weakest link in the second half of this year," Atsi Sheth, Chief Economist, Reliance Equities, said, adding that she was looking at a growth of 6–6.5 per cent for the second half of the year.

The break-up:

• FY09 farm growth seen at 2.6 per cent vs 4.9 per cent (YoY)
• FY09 manufacturing growth seen at 4.1 per cent vs 8.2 per cent (YoY)
• FY09 construction growth seen at 6.5 per cent vs 10.1 per cent (YoY)
• FY09 financial services growth seen at 8.6 per cent vs 11.7 per cent (YoY)
• FY09 mining growth seen at 4.7 per cent vs 3.3 per cent (YoY)
• FY09 services growth seen at 9.6 per cent vs 10.9 per cent (YoY)
• FY09 industrial growth seen at 4.8 per cent vs 8.1 per cent (YoY)