Shocker: Economic growth in India slips further to 4.4 per cent in April-June

Written by PTI | New Delhi | Updated: Aug 31 2013, 01:27am hrs
Economic growth IndiaThe Indian economy has been steadily losing momentum in recent years. Reuters
Economic growth in India in the April-June quarter of this fiscal slipped to 4.4 per cent, the slowest pace in at least four years, dragged down by a contraction in manufacturing and mining sectors.

Standard Chartered cuts India's FY'14 GDP growth forecast to 4.7 pct

The country's gross domestic product (GDP) had expanded by 5.4 per cent in the April-June quarter of the last fiscal. On a sequential basis, the growth rate declined from 4.8 per cent in the January-March period of 2012-13.

Commenting on the data, Economic Affairs Secretary Arvind Mayaram said, "Growth in the second quarter will improve and growth in the third and fourth quarters would be better."

Growth may slow further due to higher short-term rates

Mining and quarrying contracted by 2.8 per cent in the April-June quarter against a 0.4 per cent growth in the same period of the last fiscal, according to data released today by the Central Statistical Organisation (CSO).

The manufacturing sector posted a contraction of 1.2 per cent as against a decline of 1 per cent in output a year earlier.

Other sectors, including construction, power generation, hotels and transport, showed a marked deceleration in growth.

Farm sector output expanded by 2.7 per cent in April-June compared with 2.9 per cent in the corresponding period of the last fiscal.

Growth in electricity, gas and water supply was 3.7 per cent in the April-June quarter compared with 6.2 per cent in the same quarter of 2012-13.

The construction sector expanded 2.8 per cent as against 7 per cent in the year-ago period.

The trade, hotels, transport and communications segment grew at 3.9 per cent against 6.1 per cent.

The growth rate in the services sector, including financing, insurance and real estate, stood at 8.9 per cent against 9.3 per cent in same quarter of 2012-13.

Community social and personal services registered a growth of 9.4 per cent compared with 8.9 per cent.

"We were aware that the growth rate has been slowing down. We never felt that in the first quarter there was much sign of an improvement...it is in the second half of the year that we might see an improvement," Planning Commission Deputy Chairman Montek Singh Ahluwalia said.

According to Ahluwalia, improvement in the second quarter of this fiscal would be "mainly because of the number of steps that have been taken in the last two or three months."

"The GDP figures for first quarter clearly show that the economy continues to be in the throes of a slowdown. A coordinated effort from the government and the RBI is required to ensure that this vicious cycle is broken," CII Director General Chandrajit Banerjee said.

Another expert said quarterly GDP may not look up in the near future unless structural deficiencies in the industry sector are addressed and indicated that the numbers could have been worse.

"However, US recovery has partially helped prop up services as we are seeing from the finance, insurance and business sector," said Anis Chakravarty, senior director at Deloitte in India.

Industry reaction: Govt must take immediate steps to revive growth

With the first quarter GDP slipping to 4.4 per cent, India Inc today said the government should take immediate steps to reverse the slowdown in economic growth and there were no signs of a turnaround as investor sentiment continued to remain low.

"The GDP figures for first quarter clearly show that the economy continues to be in the throes of a slowdown. The concern becomes more acute when we see that at the present moment, there are no clear indications that the economy has bottomed out," CII Director General Chandrajit Banerjee said.

There are no visible signs of investment pick up as investor sentiments continue to be very low. A weak rupee, tight liquidity, high cost of funds, procedural delays, etc, are all coming in the way of an investment revival, he added.

Contraction in manufacturing and mining sector pulled down the economic growth in the April-June quarter of this fiscal to 4.4 per cent-- the lowest in past several years.

"The economy continues to tread in difficult waters as many challenges remain on the fore. Understandably, there is no perfect recipe to steer out of the current state of affairs but what we need is swift action given the volatile situation," Ficci President Naina Lal Kidwai said.

Manufacturing sector also posted a contraction of 1.2 per cent in the first quarter of this fiscal as against a decline of one cent in output in the same period of 2012-13.

"The industry fears that in case urgent steps are not taken to revive the manufacturing sector, jobs will be at stake, Assocham Secretary General D S Rawat said.

We would have to strive harder on the reform front to give a push to the manufacturing sector, Kidwai said.

Hastening disinvestment of public sector units, ensuring coal supplies to the power sector, promoting competition in the mining sector and ensuring speedy implementing of Delhi-Mumbai Industrial Corridor (DMIC) would be seen as positive developments, Banerjee said.

A coordinated effort from the Government and the RBI is required to ensure that this vicious cycle is broken, he said.

Meanwhile, PHD chamber of commerce and industry urged the RBI to cut policy rates to revive the economic growth.

"Since wholesale price inflation (WPI) scenario is stabilizing at around 5 per cent during the last many months, at this juncture rate cut is inevitable to facilitate industrial production," it said.

Besides, the farm sector output expanded by just 2.7 per cent in April-June quarter this year, only marginally down from 2.9 per cent in the corresponding period of last fiscal.

However, India Inc expects a pick up in agricultural growth on the back of good monsoons.

"With monsoons being normal, a good agricultural performance coupled with rise in rural wages would help bolster rural demand," Banerjee said.

Several other sectors including construction, power generation, hotel and transport showed marked deceleration in growth.

India's economic growth slows to four-year low in June quarter

(Reuters) Economic growth in India fell to 4.4 per cent in April-June quarter of 2013-14 from 5.4 per cent in same period of previous fiscal. The GDP growth logged is the slowest quarterly rate since the global financial crisis in the three months through June, lower than expected and hurt by a contraction in mining and manufacturing sectors, government data showed on Friday.

Analysts polled had forecast growth of 4.7 percent. June's figure of 4.4 percent was the slowest growth since the Jan-March quarter of 2009.

The Indian economy has been steadily losing momentum in recent years. Economic growth virtually halved in two years to 5 percent in the fiscal year that ended in March -- the lowest level in a decade -- and most economists surveyed in the past week expect 2013/14 to be worse.

Manufacturing fell an annual 1.2 percent during the quarter while mining fell by 2.8 percent, the data showed. while farm output rose 2.7 percent.

Reviving growth through effective governance

Agriculture's share in GDP declines to 13.7 pc in 2012-13

The share of agriculture and allied sectors in India's GDP has declined to 13.7 per cent in 2012-13 due to shift from traditional agrarian economy to industry and service sectors, Parliament was informed today.

"As per latest estimates released by Central Statistics Office (CSO) the share of agricultural products/Agriculture and Allied Sectors in Gross Domestic Product (GDP) of the country was 51.9 per cent in 1950-51, which has now come down to 13.7 per cent in 2012-13 at 2004-05 prices," Minister of State for Agriculture Tariq Anwar said in a written reply to the Rajya Sabha.

The decrease in the share of Agricultural and Allied Sectors in GDP of the country in comparison to other sectors is on account of structural changes due to a shift from a traditional agrarian economy to industry and service dominated one, he added.

"This phenomenon is generally expected in the normal development of an economy," Anwar said.

In a separate query, the minister said despite a decline in the sector's contribution to GDP, foodgrain production and productivity has risen.

"Despite this, the production of foodgrains has increased from 230.8 million tonnes in 2007-08 to 255.4 million tonnes in 2013-14 (fourth advance estimates)," Anwar added.

Similarly, productivity of foodgrains has increased from 1,860 kg per hectare in 2007-08 to 2,125 kg a hectare in 2012-13 (fourth advance estimate), he said.