The Telegraph
Friday , February 1 , 2013
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Growth rate for last fiscal cut to 6.2%

New Delhi, Jan. 31: India today revised marginally downwards its economic growth rate for 2011-12 to 6.2 per cent from an earlier estimated 6.5 per cent on the back of a drop in savings rate.

However, the downward revision of 2011-12 GDP (gross domestic product) figures comes after the estimate for 2010-11 was raised to 9.3 per cent from an earlier calculated 8.4 per cent, according to figures released by the Central Statistical Organisation today.

CSO officials admitted that the revisions in the economic growth figures for previous years would mean the GDP growth rate for 2012-13 would also have to reviewed.

For the first half of the current fiscal, the GDP growth had been calculated at 5.4 per cent. This could now be marginally revised upwards. The finance ministry expects India's GDP to increase 5.7-5.9 per cent in the 2012-13 financial year. However, the RBI sees growth closer to 5.5 per cent.

“What’s worrying is not the mild reworking of the GDP rate … what we are looking at with discomfort is the fall in savings rate, especially personal and corporate savings,” said D.K. Joshi, chief economist of Crisil, in an interview with The Telegraph.

The country’s gross domestic savings rate fell from 34 per cent in 2010-11 to 30.8 per cent of GDP in 2011-12, on the back of lower savings by almost everyone — but markedly by households whose financial savings came down from 10.4 per cent to 8 per cent, much of it because savings were diverted to gold hoarding.

Withdrawal of tax saving incentives on a host of small savings schemes also saw diversion from household financial savings, say analysts.

“But it’s the corporate savings figures which are equally disturbing… it slowed down from 7.9 per cent in 2010-2011 to 7.2 per cent in 2011-12… that means a profit squeeze all around,” pointed out Joshi. The public sector savings, too, came down from 2.6 per cent to 1.3 per cent in 2011-2012.

None of these are good portends, economists point out, as it means India’s investment in future factories and in expanding or modernising existing ones will be affected.