23 Feb 2009 4:33 PM

CMIE expects GDP to grow by 7% in 2009-10

A continuation of growth in agriculture, a small pickup in industry and a slowdown in the services sectors is expected to result in a GDP growth of 7.0 per cent during 2009-10. This rise is expected to come over a 7.1 per cent growth estimated for 2008-09.

Recording a positive growth for the seventh consecutive year, we expect agricultural sector to grow by 2.4 per cent in 2009-10. The industrial sector which was hit hard by the global liquidity crisis in the October-December 2008 quarter, is expected to recover gradually in 2009-10 and register a six per cent per cent growth.

The industrial sector faces no supply constraints as new capacities worth Rs.5 lakh crore are expected to be commissioned in 2009-10. A number of new capacities that were scheduled to be completed during 2008-09 are now expected to be completed in 2009-10. Domestic demand is expected to remain robust on account of the sustained growth in agriculture and the limited damage caused by the global liquidity crisis. Lower interest rates and inflation would help in reviving the demand momentum. The industrial sector, however, would face a contraction in demand from the international markets.

Growth in trade, transport, hotels and communications is expected to slow down in 2008-09 and then again in 2009-10. This sector is larger than India's industrial sector and thus, its slowing down has a significant impact upon the overall growth estimates. The fall in India's international trade is the prime reason for slower growth in the services sector.

The financial sector's growth is expected to fall in 2008-09, but, it is expected to recover in 2009-10. And, growth in the social and personal services is expected to remain robust.

A robust 26 per cent increase in government spending aided growth in PFCE during 2008-09. We expect PFCE to increase by 5.6 per cent in 2009-10 over a 6.5 per cent growth expected in 2008-09. Uncertainty of jobs in export-linked industries together with a expectation of a lower growth in wages is likely to constraint growth in PFCE.

Sonal Bhatia
bsonal@cmie.com