India’s GDP grew at 4.8 per cent for the second quarter of the current year, July-September 2013. The data, released by the Central Statistics Office on Friday, are entirely in line with expectations. Together with the 4.4 per cent clocked in the first quarter, which marked a four-year low, economic growth during the first half of the year has been a meagre 4.6 per cent. Policymakers are banking on much higher growth rates — in the vicinity of 5.5 per cent — during each of the remaining quarters to pull the economy out of the sub-5 per cent growth trajectory. In 2012-13, the economy grew by 5 per cent, the lowest annual rate of growth in a decade. Companies shelved their investment plans in an uncertain and often adverse policy environment, while consumers cut back on spending in the face of high borrowing costs. The challenge has been to revive investment demand and spur consumer spending. There are no easy answers. Great significance is attached to the clearance of stalled and new projects by a special cabinet committee. However, it is too early to measure outcomes. Persistently high inflation and well-entrenched inflation expectations have dragged consumption down.

A more optimistic view is that the economy has seen its worst, and from now on a recovery is quite possible. Supporting this view is the mild upturn in industry and a sharp pick-up in agriculture. Industry rose by 2.4 per cent in the second quarter from a meagre 0.2 per cent in the previous quarter, on the back of improvement in the core sectors of mining, utilities and construction. The revival in exports has certainly helped in achieving a turnaround in manufacturing. It grew by 1 per cent in the second quarter compared to a decline by an identical margin in the first. Yet, too much should not be read at this stage into the improvement in this critical sector. However, agricultural growth — at 4.6 per cent compared to 2.7 per cent in the April-June quarter — might well be sustained and in fact spearhead overall recovery in the latter part of the year. The biggest dampener, however, is likely to be in one important sub-sector of services — community, social and personal services. Often considered to be a proxy for government spending, its growth rate has slumped to 4.2 per cent from 9.4 per cent in the first quarter. The government has the unenviable task of reining in fiscal deficits to within 4.8 per cent without drastically cutting down on essential government spending. Without this, a growth rate of 5 per cent or more will be unattainable.

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