CMIE pegs FY12 growth at 8.7%

The Centre for Monitoring Indian Economy (CMIE) expects real GDP to grow by 8.7% in 2011-12 finacial year.

CMIE's forecast of an 8.7% increase in real GDP in 2011-12 is much higher than the forecast of most other financial institutions, which hover close to 8%.

The higher forecast reflects our expectation of a big increase in the commissioning of projects worth Rs 8 lakh crore, which is much higher than the commissioning ever seen before. The highest commissioning of projects of Rs 4.3 lakh crore was seen in FY10, CMIE said in its monthly review here.

The real private final consumption expenditure (PFCE) is expected to slow down to 7.5%. This would be partly in response to the RBI hiking interest rates in recent times. However, growth in consumption demand from rural India would pick up following an expected good crop and the handsome increase in minimum support prices.

"We expect agricultural incomes to grow by 3.2% in real terms in FY12 over the 6.6% growth recorded in FY11," CMIE said.

Urban demand is expected to slow down because of the increase in real estate prices and hike in interest rates. The increase in real estate prices has had an impact upon the demand for new houses which in turn is expected to impact demand for consumer durables.