The economic growth slipped drastically to 6 per cent in the third quarter of the fiscal, around the same level witnessed during global financial meltdown, even as the Indian Government partially rolled back stimulus on the premise that the economy is on a rebound.
The drastic slippage could be gauged from the fact that the economy grew by 7.9 per cent in the previous quarter, which raised the hopes that the economy is now on sustained recovery trajectory.
Economic growth in the third quarter came down due to a 2.8-percentage points contraction in farm output due to the worst drought in 40 years as well as a 2.2-percentage points downward spiral in community, social and personal services,
the Government said.
The growth is almost same as witnessed after deepening global crisis impacted the economy from the middle of September 2008.
In the third quarter of the last fiscal, the economy expanded by 5.8 per cent as per the provisional estimates.
However, this figure now stands revised at 6.2 per cent, according to the GDP data released Friday.
To achieve a 7.2 per cent growth this fiscal, as estimated by the Central Statistical Organisation, the economy would have to grow by over 8 per cent in the current quarter.
However, Finance Secretary Ashok Chawla said," It (slow growth) is not very surprising." He said performance has to improve in the fourth quarter to achieve growth at the level of CSO estimates.
Planning Commission of India deputy chairman Montek Singh Ahluwalia, however, said, "it (economic growth) is on expected lines and we are hopeful of 7.2 per cent growth this fiscal."
The Government is expecting a 7.5 per cent GDP growth this fiscal. The manufacturing sector continued its upward march expanding by 14.3 per cent against 1.3 per cent in the same period last year.
Construction grew by 8.7 per cent against 6.5 per cent,mining and quarrying by 9.6 per cent versus 9.5 per cent and construction by 8.7 per cent compared to 6.5 per cent.
However, electricity, gas and water supply slowed down to 4.9 per cent from 7.4 per cent.
Services like trade, hotels, transport and communication rose to 10 per cent from 8.5 per cent and trade, while financing insurance, real estate and business services expanded by 7.8 per cent against 7.1 per cent.
While it may be argued that economic growth is down because of contraction in farm output and hence rollback of stimulus might not impact economic recovery.
However, community, social and personal services are also down, which means that the impact of higher salaries given to Government employees are now petering out.
Also, slow growth in electricity generation may impact future industrial growth as well.