Press Information Bureau

Government of India

Ministry of Finance

22-May-2012 19:30 IST

As per the Press note on “Revised Estimates of Annual National Income, 2010-11 & Quarterly Estimates of Gross Domestic Product (Q4), 2010-11” released on 31st May, 2011 by Central Statistics Office (CSO), the growth rate of GDP at factor cost at constant (2004-05) prices for 2010-11 was 8.5 per cent and 7.8 per cent for the last quarter (January-March 2011). However, CSO revised their estimates in their Press Release on 31st January 2012, to 8.4 per cent. The slowdown in growth in GDP in last quarter of the year 2010-11owes mainly to lower growth in mining and quarrying, manufacturing, construction, trade, hotels, transport & communication and community social & personal services.

As per CSO data, the growth rates of GDP at factor cost at constant (2004-05) prices in Q1, Q2 and Q3 of 2011-12 are 7.7 per cent, 6.9 per cent and 6.1 per cent respectively. The average growth rate for first three quarters of 2011-12, works out to be 6.9 per cent.

Monetary tightening to control inflation and anchor inflationary expectations generally results in compression of demand that comprises investment and consumption. Tightening of monetary policy, in particular, raising the repo-rate in order to control inflation resulted in slowing down of investment and growth particularly in the industrial sector. The Economic Survey 2011-12, has forecast the growth rate of real GDP for 2012-13 to be 7.6 (+/-0.25) per cent.

This information was given by the Minister of State for Finance, Shri Namo Narain Meena in written reply to a question in Rajya Sabha today.

DSM/Hb

Monetary tightening compresses demand and slows GDP growth, with sectoral weaknesses amplifying the slowdown. Fluctuations in GDP growth include a downward revision for 2010-11 and deceleration through three quarters of 2011-12, with the last quarter slowdown traced to weaker mining, manufacturing, construction, trade, transport and related services. The statement attributes the growth moderation to monetary tightening, particularly repo rate increases that compress investment and consumption and adversely affect industrial growth, and records the Economic Survey projection for 2012-13.