GDP growth at 5% not surprising
Soumya Kanti Ghosh: Feb 08 2013, 02:59 IST
In recent times, macro-numbers have surprised both on the upside and downside. First, it was the current account deficit (CAD) at 5.4% of GDP (Q2FY13) that surprised on the downside. Next, the inflation numbers for December 2012 at 7.2% was a positive surprise. However, the advance GDP numbers for FY13 at 5% has now surprised nearly all independent estimates, including the revised RBI estimate of 5.5%. What is more surprising is that that this 5% growth rate will be a full 2.6% lower than the initial PMEAC estimates for the current fiscal, at 7.6% (subsequently revised to 6.7%). This trend is reminiscent of the revised estimates for FY12 at 6.2%, significantly lower than the first PMEAC estimates of 9.0%!
A closer look at the Table 1 shows that, contrary to earlier belief, growth may not have bottomed out yet in the current fiscal. Based on a first-half growth of 5.4% and advance estimates for FY13 at 5%, the growth rate for the second half is estimated at 4.6%. The growth rate in the services sector has almost collapsed and is projected to be only 6.6% in the current fiscal. Nearly all sub-components of the services sector are slowing signs of a significant downturn. Notably, the so-called resilience of the services sector may have now been overdone. For example, more than half of the service sub-sectors may be regarded as endogenous/derived (where growth depends on economic activity in other sectors). Among these sectors are:
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