India’s real GDP is expected to grow by 8.6 per cent this fiscal compared to a growth of 8.5 per cent recorded in FY 11, the Centre for Monitoring Indian Economy (CMIE) said in its monthly review here.
The industrial sector is expected to grow at a faster rate of 8.9 per cent compared with the 7.9 per cent growth it registered in 2010-11.
Growth of the services sector is projected to scale up to 9.9 per cent against 9.4 per cent earlier. However, the agricultural sector would see a fall in its growth rate from 6.6 per cent in FY 11 to 3.2 per cent in FY 12.
The 8.6 per cent real GDP growth forecast is a minor revision from the earlier forecast of 8.7 per cent. The downward revision is essentially in the mining sector, CMIE said.
2011-12 has got off to a mixed start as the timely onset of the monsoon and its progress through June and early July was good enough to ensure a good harvest. The Government has also raised the minimum support prices very substantially to enthuse sowing.
However, industrial production growth rates have been poor during April and May at around six per cent. Concerns regarding inflation continue as it has remained at very high levels of around 9 per cent.
Expectations of further interest rate hikes therefore continue to prevail. Data from rating agencies suggest an increase in risk.
The share of non-investment grade paper has increased from 39 per cent in the second half of 2010 to 48.5 per cent in the first half of 2011.
The hike in petroleum prices and reduction in indirect taxes on import of crude oil in June and an expectation of a small fall in the growth in raw material costs, however, have improved the profitability of the corporate sector, it said.
Many infrastructure sectors, such as railway and electricity have recorded good growth rates of 7.4 and 8.4 per cent, respectively. Foreign trade has been very buoyant with a growth of 38 per cent in April-May and bank credit growth is robust at over 20 per cent even after 10 occasions of the rate hikes by the RBI.
CMIE’s CapEx database suggest a revival in capex in FY 12 as nearly Rs 8 lakh crore worth of projects are expected to be commissioned during the year.
Most of the projects getting commissioned in FY12 are in the power and steel sector. The construction sector will be other big beneficiary of the expected capex boom.
“We expected its growth to accelerate from 8.1 per cent in FY 11 to 10.5 per cent in FY 12,’’ the CMIE said.