Mumbai: The Centre for Monitoring Indian Economy (CMIE) expects real GDP to grow by 8.7 per cent in the financial year of 2011-12. The CMIE's forecast of an 8.7 per cent increase in real GDP in 2011-12 is much higher than the forecast of most other financial institutions, which hover close to 8 per cent.

The higher forecast reflects our expectation of a big increase in the commissioning of projects worth Rs 8 lakh crore, which is much higher than the commissioning ever seen
before. The highest commissioning of projects of Rs 4.3 lakh crore was seen in FY 10, CMIE said in its monthly review here.

The real private final consumption expenditure (PFCE) is expected to slow down to 7.5 per cent. This would be partly in response to the RBI hiking interest rates in recent times.
However, growth in consumption demand from rural India would pick up following an expected good crop and the handsome increase in minimum support prices.

"We expect agricultural incomes to grow by 3.2 per cent in real terms in FY 12 over the 6.6 per cent growth recorded in FY 11," CMIE said.

Urban demand is expected to slow down because of the increase in real estate prices and hike in interest rates. The increase in real estate prices has had an impact upon the demand for new houses which in turn is expected to impact demand for consumer durables.

About commissioning of projects worth Rs 8 lakh crore this year, it said many of them have rolled over from the previous year and are expected to be completed during FY 12. As a result, we expect capital formation to grow by a handsome 14.6 per cent in FY 12, it added.

The construction sector would be a direct beneficiary of this increase in capital formation. We expect this sector to grow by 10.5 per cent in FY 12. Power generation is expected
to pick up significantly in FY 12 because of a big increase in the commissioning of new capacities. We expect this sector to record a real growth of 10 per cent in FY 12, CMIE said.

(Agencies)