Signalling the onset of a slowdown owing to inflationary pressures and the impact of a consequent on-going tight money policy, the country's GDP (gross domestic product) growth slipped to 7.8 per cent in the fourth quarter (January-March) of 2010-11, pulled down mainly by a poor showing by the manufacturing sector.

However, even as the fourth quarter growth was way lower than the 9.4 per cent expansion in the same three-month period of 2009-10, a robust farm sector growth coupled with better showing by construction and financial services propped up the overall GDP growth for the entire 2010-11 fiscal year to 8.5 per cent from 8 per cent in the previous fiscal.

With inflationary pressures nowhere near abating, the general consensus within the government, industry and economic analysts is that the declining growth trend seen in the last quarter of 2010-11 is likely to continue through a major part of the current fiscal also. Although the GDP growth numbers for the first and third quarters of 2010-11 stand revised upwards to 9.3 per cent from the earlier estimate of 8.9 per cent and to 8.3 per cent from 8.2 per cent, particularly disconcerting is the slump in manufacturing growth which dipped to 5.5 per cent during the January-March quarter from a robust 15.2 per cent in the same quarter of 2009-10.

Worse still that growth in the mining and quarrying sector also slipped to a mere 1.7 per cent during the quarter from 8.9 per cent in the same period of the previous fiscal. The saviour, as far as GDP growth is concerned, was the farm sector which saw a healthy growth of 7.5 per cent during the fourth quarter ending March this year as compared to a paltry increase of 1.1 per cent witnessed in the year-ago period.

Inflation a dampener

Voicing concern over the declining growth trend while commenting on the GDP data release here on Tuesday, Finance Minister Pranab Mukherjee said: “Growth [in the current fiscal] would suffer if inflation continues to remain high... there may be little less [growth] if inflationary pressure continues”.

Mr. Mukherjee, however, dubbed the growth figures for the entire fiscal as encouraging. “Advance estimate was 8.6 per cent that was on February 7. And now the revised estimate is more or less the same, it is 8.5 per cent. The encouraging part is, of course, contribution of agriculture [which grew by 6.6 per cent in 2010-11]. But manufacturing, mining and quarrying have also, more or less, are on the projected lines. Therefore, I do hope it would be stable, it would be confirmed when the final figure would be available,” he said.

Forecast lowered

In his comments on the GDP data and projections for the current fiscal, Planning Commission Deputy Chairman Montek Singh Ahluwalia said: “We have lowered the growth forecast for 2011-12. The RBI [Reserve Bank of India] has said something. Finance Ministry has said that it should be 8.5 per cent. I think somewhere between 8 per cent and 8.5 per cent”.

Pointing to the reason for the slump in overall growth during the fourth quarter, Prime Minister's Economic Advisory Council (PMEAC) Chairman C. Rangarajan said: “[It] was mainly due to slower growth in the manufacturing sector”. As for the current fiscal, he hoped that the overall growth would be around 8.5 per cent although agriculture could witness some moderation.