Macro Economics

The Indian economy is estimated to grow by 6.9
per cent in 2011-12 in terms of gross domestic product
at factor cost at constant 2004-05 prices. This follows
a growth of 8.4 per cent in 2010-11. Relative to high
growth in the period 2003-04 to 2010-11 (with the
exception of 2008-09), growth in 2011-12 is on the
lower side. This is attributable mainly to weakening
industrial growth in a milieu of persistent inflationary
pressures and deterioration in the global economic
situation. Monetary policy tightening to control inflation
and inflationary expectations typically operates
through a compression in aggregate demand and this
was in evidence in 2011-12. The Reserve Bank of
India (RBI) raised policy rates by 375 basis points
since March 2010. The impact of tight monetary policy,
particularly gets reflected in the quarterly growth rates
of GDP. Growth in the first three quarters of the current
fiscal came down successively. However, relative to
many other economies in the world, growth of 6.9 per
cent in India is among the highest. The slowdown in
the economy, coupled with rising costs and narrowing
profit margins of the corporate sector led to a lowerthan
budgeted growth in government revenues.
slowdown in the industrial sector which is estimated
to grow at 3.9 per cent in 2011-12 as against 7.2 per
cent in 2010-11 and lower growth of 2.5 per cent in
agriculture sector on top of a high growth rate of 7
per cent achieved in 2010-11. Services sector is
estimated to grow at robust rate of 9.4 per cent in
2011-12, which is more or less at the same level as
in 2010-11.