Slowest pace of expansion since 2008 meltdown

In a clear reflection of the ongoing economic downturn, GDP (gross domestic product) growth decelerated further to 4.4 per cent — the slowest pace of expansion since the 2008 meltdown — in the first quarter (April-June) quarter of the current fiscal. The pull-down, as has been the case in recent years, was mainly due to the dismal performance mining and manufacturing.

Such has been the steady slide in economic growth that from a GDP expansion of 5.4 per cent achieved in the first quarter of 2012-13, the performance during the April-June quarter this fiscal marked a further moderation on a sequential basis from 4.8 per cent in the fourth quarter (January-March) last fiscal.

Although the expectation in both official quarters and market participants was for a flattish growth during the first quarter of 2013-14, the actual performance turned out to be lower than anticipated, especially as seven out of the eight sectors either posted contraction in growth or a lower rate of expansion.

Not surprising, therefore, that while government quarters expressed cautious optimism over an improvement in performance over the remaining three quarters of the fiscal year, India Inc. called for concerted action by the government and the Reserve Bank of India (RBI) by way of proactive measures to spur the economy.

Pointing out that the GDP numbers for the first quarter clearly showed that the economy continued “to be in the throes of a slowdown,” CII Director General Chandrajit Banerjee, in a statement, said: “A coordinated effort from the government and the RBI is required to ensure that this vicious cycle is broken”.

Official reactions on the GDP growth figures, however, were not alarmist. Commenting on the numbers, Economic Affairs Secretary Arvind Mayaram said: “Growth in the second quarter will improve and growth in the third and fourth quarters would be better”.

According to Planning Commission Deputy Chairman Montek Singh Ahluwalia, there would be improvement in the second quarter mainly because of the number of steps that have been taken in the last two or three months. “We were aware that the growth rate has been slowing down. We never felt that in the first quarter there was much sign of an improvement...it is in the second half of the year that we might see an improvement,” he said.

Be that as it may, the GDP data released by the Central Statistical Organisation (CSO) revealed that the sectors primarily responsible for pulling down growth were mining and quarrying with a contraction of 2.8 per cent in the April-June quarter against a 0.4 per cent growth in the same period of the last fiscal.

Alongside, contraction in the manufacturing sector also yawned further to 1.2 per cent from one per cent in the same quarter a year earlier.

These apart, other sectors such as construction, power generation, hotels and transport, also witnessed a significant deceleration in growth.

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