Advance estimates pegged the country's economic growth at 6.9 per cent for the current fiscal, but IIP data and agriculture production numbers suggest the chance of a marginal improvement from the initial numbers.
Finance ministry officials had projected the economic growth to stand in the range of 7-7.3 per cent for the ongoing 2011-12 financial year.
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Now, the problem with a GDP number below seven per cent is that it reminds one of the crisis-level economic expansion at 6.8 per cent during 2008-09. If it is between seven and 7.3 per cent, however marginal the growth would be, it gives a psychological boost that the economy has not crawled back to the crisis level.
Advance estimates took manufacturing numbers at 3.9 per cent for 2011-12. But if one takes into consideration the manufacturing growth in the IIP (index of industrial production), it was also at 3.9 per cent till December. The IIP numbers also include a sharp contraction of 4.74 per cent in October.
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Most experts say manufacturing will improve in January-March. Also, advance estimates of GDP (gross domestic product) factors in only the first estimates in 2011-12; the second advance estimates have already come. The first estimates pegged foodgrains production at 245 million tonnes, while the second projected it at 251 million tonnes for 2011-12.
Advance estimates projected agriculture and allied activities to expand by 2.5 per cent this fiscal against 7 per cent last fiscal. Economists say the advance estimates of GDP numbers did not capture the impact of recent rains on yields. They expect a quarter to one percentage jump in agriculture growth numbers compared with advance estimates.
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Besides, HSBC purchasing managers index (PMI) for manufacturing stood at 57.5 points in January, up from 54.2 in December, the highest since May 2011. It grew 6.08 per cent in January sequentially, the highest rise since April 2009. Also, services PMI rose to 58 points in January from 54.2 points in the previous month.
Finance Ministry officials say the economy will finally grow in the range of 7-7.3 per cent. The GDP grew by 8.4 per cent last year.
The Prime Minister Economic Advisory Council expects the economy to grow between 7 and 7.2 per cent this fiscal. The country's agriculture and manufacturing are expected to do better than what the advance estimates said, according to PMEAC chairman C Rangarajan.
The high-powered council will, this Wednesday, come out with its outlook for 2012-13, where it will also assess the actual GDP numbers for 2011-12. Even its revised projections of 8.2 per cent - from 9 per cent - do not seem to be achieved for this fiscal. Even if the economy grows by 7.2 per cent mark, it would still be a percentage point lower than the revised projections. .
Advance estimates for the GDP are based on actual data of the first half, partial actual data and part projections for the third quarter and full projections for the fourth quarter.
But, does 7 per cent mark really provide a psychological booster to the economy?
"It depends on the glass you are wearing," according to Fitch Ratings director Devendra Pant. "If you are really optimist, you will say that the economy did not go below 7 per cent. But if you are pessimist, you will say 'what is the big deal, it is small percentage up from the crisis level'."
Fitch Ratings pegs the Indian economy to grow by 7 per cent this fiscal, marginally up over advance estimates. "Some factors," Pant says, "will push up economic growth, while others will pull it down."
For example, mining contracted 2.7 per cent in the first nine months of this fiscal. Advance estimates show contraction of 2.2 per cent, which could be bit worse finally.
Dun & Bradstreet senior economist Arun Singh does not expect the economy to grow beyond 6.9 per cent this fiscal. "I expect the economy to start showing some improvement after the first quarter of the next fiscal with a lag impact of expected rates cut by RBI from April or May," he adds.