CMIE projects real GDP to grow 8.8% in FY12

Indian economy is expected to maintain the 8%-plus growth trajectory in FY12 with its real GDP projected to grow by 8.8% during the fiscal, a leading economic think-tank said today.

"We project that real GDP will expand by 8.8% during the fiscal (2011-12)," the Centre for Monitoring Indian Economy (CMIE) said in its latest monthly review of the country's economy here today.

The domestic environment is conducive for growth, private final consumption expenditure is projected to grow by a healthy 7.5% and gross fixed capital formation by 15%, it said.

"It is assumed that the south-west monsoon will be normal for the second consecutive year in 2011," CMIE said.

On the downside risks, it said that these relate mainly to poor rainfall and to the performance of the global economy.

In FY11, India's economic performance has been robust and real GDP is estimated to have grown by 9%, it said.

"This has been powered by a rebound in the agricultural sector following the drought in 2009-10, and a sharp pick up in private consumption and gross fixed capital formation," CMIE said.

According to the think tank, the agricultural and allied sector is projected to grow by 3.1% in 2011-12, on top of the 5.1% growth estimated in 2010-11.

The industry, including construction, is projected to grow by 9.4% during FY12 as compared to 8.6% estimated in 2010-11. Steel, cement, automobiles and petroleum products segments are projected to see a 9%-plus growth in FY12, it said.

Other industries like paints and varnishes, tubes and pipes, sponge iron, lifts and elevators, domestic refrigerators and transformers are expected to do well, too, CMIE said.

Growth in industrial production will be driven by a rise in consumption demand and investment demand.

"Consumption demand, in turn, will be driven by a rise in corporate wages, fresh employment generation and lower inflation. Investment demand is expected to remain buoyant, as more and more projects move into the implementation stage," it said.

Projects worth Rs 8 lakh-crore are scheduled to be commissioned in FY12 as compared to Rs 3.6-lakh-crore in FY11.

This is expected to boost activities in construction sector. The sector is projected to grow by 10.5% during the fiscal, as compared to an estimated 9.5% in 2010-11.