Ashok Dasgupta

Reflects impact of global meltdown

NEW DELHI: Reflecting the severe impact of the global meltdown, India’s economic growth slumped to 5.3 per cent during October-December this fiscal to mark the lowest growth rate in any quarter over the last five years.

Evidently, the two stimulus packages put in place earlier during the fiscal year, as also the measures announced in the interim budget to spur the economy, would take some more time to show effect and, therefore, the onus is now on the Reserve Bank of India (RBI) to provide the necessary impetus by cutting its key policy rates.

Even as a deceleration in GDP (gross domestic product) growth during the third quarter of the current fiscal — as against a robust 8.9 per cent growth in the same quarter of 2007-08 — was anticipated on account of the expected contraction in the manufacturing sector, the surprising bit was the dismal performance of the agriculture sector.

According to the GDP data unveiled by the Central Statistical Organisation (CSO) here on Friday, the growth rate in manufacturing shrank 0.2 per cent into negative territory during the quarter in keeping with the dismal IIP (Index of Industrial Production) figures for October and December 2008 released earlier.

What came as a shock, however, was the contraction in farm sector output by a significant 2.2 per cent even in the wake of the farm debt waiver programme. “What has come as a surprise is agriculture… but we can be optimistic that the figures will improve,” said India’s Chief Statistician Pronab Sen.

With the slide in GDP growth during the third quarter, the economy has notched up a growth of 6.9 per cent for the first nine months of 2008-09 as compared to a healthy nine per cent achieved during the same period in the previous fiscal.

Thus, unless the fourth quarter performance turns out to be markedly better — which seems unlikely in the grim global scenario — the official projection of 7.1 per cent for the entire fiscal appears to be a far cry. “It is unlikely that the growth is going to be 7.1 per cent [for the entire 2008-09],” Mr Sen said.

Despite the apparent setback, the Government, however, expressed cautious optimism as the third quarter growth was not much off the mark. Commenting on the GDP figures, Minister of State for Finance P. K. Bansal said: “We had maintained seven per cent with a downward bias. That much has been said, but [there is] still a quarter to go. Even with 5.3 per cent, it still comes [to] around seven per cent, maybe a shade below that…Both the RBI and the government are always responsive to any emerging situations.”

On the positive side, community, social and personal services posted a robust 17.3 per cent growth in the third quarter against 5.5 per cent in the like period a year ago. Financing, insurance, real estate and business services also grew by 9.5 per cent as against 11.9 per cent. Trade hotels, transport and communication, however, grew by a lower 6.8 per cent as compared to 11.6 per cent a year ago as tourist arrivals declined on account of the global crisis the Mumbai terror attacks. With the sharp slowdown in realty, construction growth also fell to 6.7 per cent during the third quarter as against nine per cent a year ago.

Alongside, domestic demand has remained buoyant even in the wake of the slowdown. Private final consumption expenditure at current and constant prices stood at 10.7 per cent and 10 per cent.