Even the most diehard optimists would now admit that it will be extremely difficult to pull the economy back from its current downhill ride. According to official statistics released on Thursday, the economy grew by just 5.3 per cent during the last quarter of fiscal 2011-12 (January-March 2012). This has been the lowest growth rate recorded in any quarter during the past three years, substantially below the 6.1 per cent clocked during the third quarter (October-December 2011).The trend line is unmistakable: there has been a sure and steady decline over successive quarters. That in turn has necessitated a revision in the annual growth figures. Notably for the last year, while the advance estimates of February projected a GDP growth figure of 6.9 per cent, the rate has now been pegged at 6.5 per cent after factoring in the fourth quarter data. To put this in perspective, the economy grew by 8.4 per cent during 2010-11 on the back of an impressive 9.2 per cent in the fourth quarter. During the January-March quarter, industrial performance has suffered with manufacturing actually contracting by 0.3 per cent compared to a 7.5 per cent increase the previous year. Mining grew by 4.3 per cent, up from 0.6 per cent the previous year. However, construction was down by nearly a half. The services sector has had a fairly uneven performance. While ‘financing, real estate, insurance' saw robust growth of 10 per cent, the sub-segment ‘trade, hotels' decelerated sharply to 7.1 per cent from 11.6 per cent a year ago.
The latest data merely confirm the steady deterioration in the macroeconomic landscape. Recently, some of the world's leading investment banks had downgraded India's economic outlook for the fiscal year ending March 2013.The consensus seems to be that the Indian economy would grow by around 6.5 per cent. That is a figure that might still be difficult to achieve given the downward drift that has taken hold. The symbol of India's fall from grace is the rupee which has declined by more than 17 per cent against the dollar since the beginning of the year, creating new records each passing day. However, contrary to popular belief, a weaker rupee has not aided exports and manufacturing, both of which have declined. Imports have become costlier and the overwhelming dependence on foreign petroleum suggests the import bill will remain high. That in turn will fuel inflation. India is one of the few countries that has twin deficits — a fiscal deficit in the region of 5.8 per cent of GDP and a current account deficit likely to exceed four per cent. Investor sentiment has taken a big hit amidst widely shared perceptions of policy paralysis and this — combined with the simmering eurozone crisis — will obviously impact the investment cycle.
