India’s Gross Domestic Product (GDP) grew at the rate of 4.8 per cent during July-September 2013, according to official data released here on Friday. The rate of growth of the GDP in April-June 2013 was 4.4 per cent, a four-year low. The pick-up in the rate of growth has come from better performance of agriculture and industry.
“I don’t think at the moment we have signs of strong revival yet but I do get a picture that people think that the economy has bottomed out,” Planning Commission Deputy Chairman Montek Singh Ahluwalia was reported to have said on the sidelines of an event at the Indian School of Business (ISB) in Hyderabad.
Finance Minister P. Chidambaram had used in this year’s Union Budget a GDP growth estimate of 5 per cent for 2013-14 for the purpose of pegging various targets. This includes the target set for the fiscal deficit at 4.8 per cent of the GDP. Since the GDP growth rate for the six months April-September is 4.6 per cent, it will have to be at least 5.4 per cent during October-March if India is to achieve a growth of 5 per cent in 2013-14.
“Jumping from a GDP growth of 4.6 per cent during the first half of the year to 5.4 per cent in the second at the moment seems to be more than what India is in a position to achieve,” said highly-placed government sources. “This means the Finance Minister will probably have to press in even greater budget cuts to meet the fiscal deficit target he has set himself.”
Rating agency Standard and Poor’s (S&P) has warned that India’s sovereign rating could be downgraded to junk status next year if, post-general elections 2014, the next government fails to revive stalled structural reforms, faltering economic growth and the stress of subsidies on state finances. The rating agency maintained its “BBB minus” rating with a negative outlook on India, its lowest investment grade.
Earlier this month, Mr. Chidambaram had expressed optimism over the emergence of “green shoots” in the economy. However, the data released on Friday shows that the manufacturing sector performance remains bleak with 3.2 per cent growth. For April-September, or the first half, it is -0.1 per cent. “How is a revival possible when the jobs-creating sector is flat,” said the sources. Speaking at an event, the Finance Minister exuded confidence that the growth rate would rise to 6 per cent next fiscal. Economic Affairs Secretary Arvind Mayaram said the third and fourth quarters will see a pick up to help attain at least 5 per cent growth for the fiscal.
Agriculture growth rose to 4.6 per cent during July-September from 2.7 per cent in April-June; the growth for the first half of 2013-14 for the farm sector, according to the data released, is 3.6 per cent. “The agriculture growth achieved in the first half of 2013-14 is just about the long term average,” said the sources. “It is hard to be excited about the data released today.”
Growth in the community, social and personal services, indicative of government expenditure, slowed significantly to 4.2 per cent during July-September from 9.4 per cent in the preceding three months.
