When actual data come, FY13 GDP growth will be 5.5% or more: C Rangarajan

Interview with Chairman, Prime Minister's Economic Advisory Council

PMEAC Chairman C Rangarajan is hopeful that economic growth would be better than the advance estimates for 2012-13. He tells Indivjal Dhasmana why he thinks so. Edited excerpts:

Advance estimates have pegged economic growth at a 10-year low of five per cent. Everyone in official circles have been projecting it to be higher. Why has the growth declined so much?
GDP growth will be higher than that given by advance estimates. These are based on the trends of the first nine months of the current financial year. There is definitely a change in the investment climate. It will pick up in the fourth quarter. When actual data come, GDP growth will be 5.5 per cent or more during the current financial year.

What will be your projections for the next financial year?
If I am expecting growth in the region of 5.5 per cent for 2012-13, it will be 6.5-7 per cent in 2013-14.

Why is it that none of the segments, except for construction, a bit of mining and quarrying, and community social and personal services, have performed better in 2012-13 than the previous financial year?
Agriculture is doing reasonably well. There were fears of a shortfall in the monsoon in the beginning of the year. Considering that, 1.8 per cent growth in agriculture is reasonable. Manufacturing growth has also picked up. In the first eight months, manufacturing grew one per cent. The advance estimates showed it would grow 1.9 per cent for 2012-13, so there is a definite improvement in in the later parts of the year. However, the services sector has not performed that well.

Why?
It is not very clear. These are in the form of projections.

Growth in gross fixed capital formation declined to 4.14 per cent, lower than 3.5 per cent during the global financial crisis. Are we back to Square One?
Investment sentiments changed after the government took certain measures. The full impact of these would be seen in 2013-14 but some of it would also be seen in the last quarter of this financial year.

Private final consumption expenditure also expanded at a lower rate of 4.14 per cent in 2012-13, lower than even the 7.4 per cent in 2008-09. Why such a low demand in the economy?
There are no clear indications. It requires further analysis.