Aggregate demand remains lacklustre, with private spending, which accounts for 60% of the GDP, showing no sign of a turnaround. Inflation remains a concern despite easing over the past few months. Risk of heavy food inflation is looming once again, with the strong likelihood of an El Nino effect sparking fears of a weak monsoon in 2014. Hopes are pegged on a new government improving the economic state of affairs and restoring confidence among consumers and businesses alike. Crucial to achieving this result would be implementing fiscally prudent policies to narrow the fiscal deficit without lowering developmental expenditure. Hesitance from the new government to take corrective action would usher the economy into a low growth cycle trap.
The key highlights of the monthly GDP growth Indicator for January 2014 are:
1. ZyFin Research estimates GDP growth at 5.2% for January 2014, as compared to January 2013. The corresponding GDP growth estimate for December 2013 was 5.7%.
2. GDP growth, however, remains higher than in the same month of the previous year. ZyFin estimated a YoY GDP growth rate of 4.6% in January 2013.
3. Inflation, as measured by the GDP Deflator, declined to 5.7%, from 7.3% in the previous month. The GDP deflator is a more comprehensive measure of underlying inflation and is widely used in developed economies.
4. The inflationary situation, despite moderating over the past two months, is still worrying. The government needs to implement stronger measures to curtail inflationary pressures.