News Hour- GDP at 5.3%: Factors leading to slowdown have bottomed out, says Pranab Mukherjee

NEW DELHI: Most of the factors that led to India's growth slowdown have bottomed out, Finance Minister Pranab Mukherjee said in a statement on Thursday, after the economy grew at to its weakest pace in nine years in the March quarter. 

"Among the factors that have contributed to the slowdown are the tight monetary policy that led to a significant rise in interest costs and the weak global sentiments that affected growth in domestic private investment ... have bottomed out," Mukherjee said. 

Annual economic growth slumped to 5.3 per cent in the March quarter as the manufacturing sector contracted and a fall in the rupee to a record low suggests the economy remains under pressure in the current quarter. 

The fiscal deficit during the 2011/12 fiscal year that ended in March was at Rs 5.2 trillion ($92.53 billion), or equivalent to 5.9 per cent of the gross domestic product. The deficit is in line with the upwardly revised estimate provided by the government in its March budget. 

Net tax receipts were Rs 6.42 trillion and total expenditure was Rs 13.19 trillion during the fiscal year. TK Arun, Editor, Opinion of Economic Times said that it is imperative to reverse the steady trend of slowing growth. "It is futile to blame the international environment for the problem. Domestic governance, taking decisions in a time-bound fashion and substitution of investment for subsidies in government expenditure are key," he said. 

Commenting on the disappointing numbers, Taimur Baig of Deutsche Bank told ET Now that with inflation high, he did not expect much action in the monetary policy review in June. He emphasised the need to revive expectations. 

Sajid Chinoy of JP Morgan expressed concern over both the pressures from Europe which might have a spillover affect and the supply side constraints that have developed in some sectors in the economy. "Investor confidence will return if twin deficits are dealt with," he told ET Now. 

C Rangrajan, Chairman of PMEAC said, "Obviously it is a disappointing one. Decline in industrial production has not been offset by growth in agri production. Going ahead we can still expect 6.5-7% as agri is likley to do well with expectation of a good monsoon, manufacturing will rise from a low base and service sector will record decent growth." 

He said that the government has in principle decided to correct diesel prices but the actual decision is influenced by political considerations. However he added that in the course of the year steps will be taken to control subsidies to keep the fiscal deficit in check. 
(Source- http://economictimes.indiatimes.com)