FE Editorial Slow and low

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: Low GDP growth of 7.9% in the first quarter comes as no surprise, given that monthly figures of the index of industrial production (IIP) had indicated that the economy had sharply lost momentum. Adding to the troubles was the marginal fall in agriculture growth to 3%, mainly on account of the high growth in the base year. But still, it’s hard to be totally unsurprised by the lowest first-quarter growth since 2003-04 when GDP growth hit a low of 5.4%. And the real worry is that, unlike in 2003-04 when growth picked up sharply in the remaining quarters of the year to touch double-digit levels, the current cyclical downswing may continue for some time. That’s because, unlike in the earlier period when the investment cycle was on an upward curve, the pick-up in fixed investment in the current quarter has been rather restrained, with the figure going up by just 60 basis points. In fact, we have single-digit investment growth after a long period. Growing infrastructure constraints will only compound the problem. This is already reflected in the slow growth of electricity generation, where growth has slumped to 2.6% in the latest quarter, the lowest growth in the last 11 quarters. The only major surprise in the industrial sector is the continued buoyancy in the construction sector, where growth has soared from 7.7% in the first quarter of last year to 11.4% in the current year, despite growing input costs and interest rates. Price trends calculated from national accounts show that costs in the construction sector have increased by 10.6% in the first quarter of the current year, the highest in any sector and almost double the price increase in the corresponding period of the previous year.