Growth data released by the Central Statistics Office last week point to a continuing economic slowdown and offer very little comfort to a government that is hoping to proclaim a recovery ahead of the elections. With no further data releases scheduled until May-end, the government will have to reckon with the fact that based on published figures it would be extremely difficult for the economy to clock a rate of even 5 per cent for the whole year. The economy grew by 4.7 per cent in the quarter ending December, which was slightly better than the average of 4.6 per cent clocked during the first half of the year (April-September 2013). For the seventh successive quarter, GDP growth has been below 5 per cent. Finance Minister P. Chidambaram in his recent budget speech expected economic growth during the second half of the year to be at least 5.2 per cent. That now seems a stupendous task given the slackness in the third quarter. The CSO’s advance estimates for 2013-14 released earlier of 4.9 per cent growth certainly does not look to be an underestimate as some government officials have been claiming. It ought to be quite disconcerting that having witnessed annual growth rates above 9 per cent in a few years during its two terms the UPA will be facing elections with the economy stuck in a sub-5 per cent growth trajectory.
A closer look at the third quarter data reveal some well-entrenched weaknesses in specific sectors. The investment scenario remains weak notwithstanding recent efforts by the government to fast-track certain large projects. There is an expected measure of uncertainty in decision-making ahead of the elections. Both mining and manufacturing declined in the three-month period. They have been weak throughout this year. Policy logjam and environmental and judicial activism have impacted adversely on mining output and this has had major negative consequences for the current account of the balance of payments. The outlook for the near future is not bright. Eight core industries which have more than one-third weight in the Index of Industrial Production, an important lead indicator, grew by just 1.6 per cent in January compared with 2.1 per cent in December. Exports are growing but at a slower pace during the three months up to January. Agriculture has done reasonably well while services, driven mainly by one sub-sector, personal community and social services — which is a proxy for government spending — picked up in the October-December quarter. GDP growth along with retail inflation and inflation expectations will figure prominently in the general election. Barring an unexpected turnaround, the government would seem to be on a weak wicket.