India's economic growth to slow to six-year low of 7.1 per cent

by Sanjay Jha | February 9, 2009 at 12:15 am

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Even though economic growth is slowing down all over the world, growth in Indian economy is on expected lines.

Indian economy is likely to grow by around 6.5-7 per cent in the current fiscal, the advance data for which would be out tomorrow, against 9 per cent in the previous fiscal despite two rounds of stimulus packages announced by the federal government.

The Prime Minister’s Economic Advisory Council has projected the economy will grow at exactly 7.1% in the current fiscal. The economy grew by 7.8 per cent in the first half of this fiscal, down from 9.3% a year ago.

This is almost 2 percentage points below the previous fiscal (2007-2008) growth of 9% despite two rounds of fiscal stimulus packages announced by the center.

A 7.1% growth in this fiscal (2008-2009) means that the growth has been less than 6.5% in the second half of fiscal. The economy has grown by 7.8% in the first half of this fiscal against 9.3% a year ago.

Talking to ET, country's chief statistician Pronab Sen said ," The growth for the fiscal would be highly influenced by the growth rate in last quarter as it has a weight of more than 35% in the total gross domestic production for the year."

The growth rate of 7.1% in GDP during 2008-09 has mainly been due to growth rates of over 5% in the sectors of construction, trade hotels, transport and communication, financing, insurance, real estate and business services, and community, social and personal services.

Shubda Rao chief economist at Yes Bank said the stimulus packages announced will have a lagged impact and the economy will recover by October 2009.

D K Joshi, principal economist at CRISIL also pointed out that as the capacity of government to spend has eroded the fiscal stimulus measures will not have the decided effects.