High demand to persist, as government ups demand side GDP: Experts
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The government's upward correction of growth estimates from the demand side for the first quarter of this fiscal have reduced apprehensions that the economy might slow down in the coming months, say experts.
Admitting to error, the government had last week revised the economic growth at market prices (that consumers pay) to 10.02 per cent for the quarter ending June 2010, from 3.65 per cent stated earlier.
However, economic growth, as is measured traditionally from GDP at factor costs or through supply side, was estimated correctly at 8.8 per cent for April-June 2010.
The wrong estimation had led to confusion among economists, who predicted that slowdown in demand will pull down economic growth in the coming months.
However they said that after the revision, it no longer seems to be the case.
"There is no question of any decline in consumption and we are in fact going to see jump in it during the coming festive and marriage season associated with the third quarter," National Council of Applied Economic Research (NCAER) Chief Statistician, Mr Rajesh Shukla, told PTI.
"This is a natural phenomena and demand will be more in the third quarter," he added.
The revised GDP data showed that the private final consumption expenditure (PFCE), which comprises expenses of households and others, had grown by 3.79 per cent during the quarter as against the earlier estimate of 0.34 per cent.
Simultaneously, the government final consumption expenditure (GFCE) was revised showing a growth of 14.20 per cent, from the original estimate of 0.59 per cent decline.
Shukla said the economy will see a stable growth in the long term.
"The response of consumers to inflation has changed and they see to it that high growth and high inflation can go side-to-side. Besides, income levels are also increasing," he said.
According to him, though the actual GDP growth in the first quarter has been better than expected, the factor is difficult to explain it by any visible indicator.
"On a conservative side, we can hope for an average annual GDP growth of 8.75 per cent from now till 2015. The nine per cent target for economic growth set by government for this fiscal is not a very high figure. It can definitely touch nine per cent," he said.
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