(Adds details, analyst comments)
By Rajesh Kumar Singh
NEW DELHI, Feb 7 (Reuters) - India's slowest growth in a
decade could be worse than anticipated, as preliminary data
released on Thursday showed the economy set to have grown 5.0
percent in fiscal year ending next month, underscoring the
urgent need for reforms to boost growth.
The central bank's forecast for the year had been 5.5
percent, while Finance Minister P. Chidambaram had projected
growth of 5.9 percent, but both appear to have been
"Five percent GDP growth for the full year is more in tune
with reality. The industrial sector downturn has extended beyond
anyone's expectation," said Rupa Rege Nitsure, chief economist,
Bank of Baroda, Mumbai.
The data will pile pressure on Prime Minister Manmohan
Singh's Congress-led government to unveil a growth-oriented
budget on Feb. 28 for the next fiscal year, beginning in April.
Unfortunately for Singh, with a national election looming in
2014, his government can ill-afford to indulge in populist
schemes and expensive projects that would handicap efforts to
lower a fiscal deficit targeted at 5.3 percent of GDP this year.
The government's advance estimate for the fiscal year
2012/13 shows that farm output is expected to grow 1.8 percent,
while the manufacturing sector is likely to grow 1.9 percent.
According to Thursday's data, capital investment is expected
to slow down to an annual 2.48 percent in 2012/13 from 4.39
percent in the previous year
Structural bottlenecks have restricted India's growth
potential to around 7 percent, according to the central bank,
ruining the aspirations India has for near double-digit
expansion needed to provide jobs for a burgeoning population.
Business leaders and economists have called on the
government to make it easier for firms to acquire land for new
projects and carry out tax reforms to boost economic growth that
has been stuck around 5.5 percent for the past three quarters.
Road, power and mining projects worth billions of dollars
have been held up for years because of delays in getting
multiple regulatory clearances.
To help revive the economy and spur investments, the Reserve
Bank of India (RBI) last month cut interest rates for the first
time in nine months, trimming the repo rate by 25 basis points.
But the RBI also warned that while halting the slide in
economic growth was a priority it had limited room for further
easing unless inflation and a high current account deficit
improved by more than expected.
The slowdown has hit government revenues, leaving New Delhi
scrambling for ways to cut its fiscal deficit to avert a
downgrade in its sovereign credit rating to junk bond status.
Forced to tighten belts, Finance Minister Chidambaram has
targeted spending cuts in welfare, defence and road projects for
his upcoming budget.
(Reporting by Rajesh Kumar Singh; Editing by Simon