India’s Gross Domestic Product (GDP) grew at 4.7 per cent during October-December 2013, the seventh successive quarter when the rate was below 5 per cent.
The official data released on Friday dashed expectations that the economy had “bottomed out.” Finance Minister P Chidambaram, presenting the interim budget, had said growth in the third and fourth quarters would be at least 5.2 per cent.
With no more data releases scheduled, the UPA will have to go to the polls with a sub-5 per cent growth rate.
“The government was over optimistic, but there's a doubt on that upturn now,” former Chief Economic Advisor Arvind Virmani told The Hindu. Shrinking output in key sectors such as mining and manufacturing dragged down overall growth.
Gross fixed capital formation shrank during October-December 2013 to 27 percent of the Gross Domestic Product (GDP) from 29.4 percent in April-September, according to the official data released on Friday.
“Corporate investments and savings have been the prime drivers of productivity and growth in the economy. It's now clear that going back to 8-percent growth will need a whole lot serious structural policy reforms,” a Former Chief Economic Advisor to the Union Finance Minister Arvind Virmani told The Hindu. The Reserve Bank's continuing anti-inflation stance has not allowed it to lower borrowing costs, which has in turn kept the private sector's appetite subdued for investments and expansions. In fact, it hiked interest rates three times between September and January.
Official data released on Friday estimated GDP growth at 4.7 percent for October-December 2013. The previous two quarters had grown respectively at 4.4 percent and 4.8 percent.
The sectors which registered significant growth during the quarter ended December 2013 are financing, insurance, real estate and business services (12.5 percent) and community, social and personal services (7.0 percent). Agriculture, forestry and fishing grew at 3.6 per cent. The growth rate in construction is estimated at 0.6 percent, according to the data released.
“With 4.4%, 4.8% and now 4.7% being the GDP growth for the last three quarters, it is needless to say that the economic situation is of great concern. A weak investment demand is the biggest problem that needs addressing,” Confederation of Indian Industry Director General Chandrajit Banerjee said in a statement. With the country heading for general elections, it is not expected that key economic legislations would get transacted, he added.
Chairman of the Prime Minister Manmohan Singh's Economic Advisory Council C Rangarajan had said on Wednesday “Third quarter GDP figure could be more than 5 per cent”. With the estimate coming out lower than the expectation, it is likely that the official projection of 4.9 percent for the whole year 2013-14 may not be met.
Given the performance in the first nine months and GDP growth of 4.9 per cent projected by the CSO in its advance estimates for this financial year, the economy must expand 5.7 per cent in the fourth quarter ending March.
Mining and quarrying contracted 1.6 per cent as against a decline of 2 per cent in the same period of the previous financial year. During April-December, the sector’s output contracted 1.6 per cent compared to a 1.1 per cent dip in production in the same period a year ago.
Gross Fixed Capital Formation, an indicator of fresh investments, at constant (2004-05) prices remained flat at Rs. 5 lakh crore in the third quarter compared with the same period of the previous financial year.