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Economic growth revised upwards to 7.1 percent

New Delhi(IANS): The Indian economy is expected to grow at 7.1 percent in the financial year ending March 31, slightly higher than the 6.9 percent growth projected in the advance estimate early this month, the Prime Minister’s Economic Advisory Council said Wednesday.

The growth in the agriculture and construction sectors is projected to remain higher than the advance estimates released early this month by the Central Statistical Organisation, C. Rangarajan, chairman of PM’s Economic Advisory Council, said in the economic review for 2011-12.

The council has pegged farm sector growth at three percent as compared to 2.5 percent growth projected in the advance estimate. A record output of rice and wheat on the back of good monsoon and strong growth in horticulture and animal husbandry segments are likely to push upward the agricultural sector growth.

The farm sector has grown by seven percent in 2010-11. The manufacturing sector is expected to grow by 3.9 percent while construction segment is expected to expand by 6.2 percent.

“Manufacturing and construction have been sluggish during the first three quarters of 2011-12. This may show improvement in the fourth quarter,” Rangarajan said at a press conference here.

Strong growth in the services sector will continue with overall growth estimated at 9.4 percent for the fiscal ending March 31, 2012. This year’s projected Gross Domestic Product (GDP) growth is substantially down from the budgetary target of around nine percent, and 8.4 percent expansion registered in the previous year.

High interest rates, fragile global economic conditions and the government’s inability to push through key reforms have stifled growth. Investment activity has slowed down and as a result the gross fixed capital formation for 2011-12 has slipped to 29.3 percent, a decline of almost four percentage points over the last four years, said Rangarajan, also a former governor of the Reserve Bank of India (RBI).

On inflation, the prime minister’s council chairman said it was estimated to come down to 6.5 percent by the end of the current financial year.

“Headline inflation has shown a decline since November 2011 and more strongly in January 2012. It is projected to be around 6.5 percent at the end of March 2012. Policies both monetary and other public policies seem to have had the desired effect,” he said.

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