- Raghuram Rajan: India better prepared to deal with US Fed tapering, but vigilance mustBase effect: GDP may get statistical boost due to weak FY13 growthEconomic growth rate in India forecast at 4.9 pct vs 4.5 pct a year ago on agri push: GovtGrowth rate has bottomed out; may be revised upwards for FY14'
in 2011-12 and used to grow at a blazing pace of 15-16% between 2004 and 2008).
Government consumption expenditure is projected to grow at almost the same rate as last year, as fiscal consolidation efforts have focused on reducing capital expenditure and the government has been less successful in reining in the revenue spending. Overall, consumption, which contributes around 70% to the near $1.8-trillion economy, is expected to grow 4.4% in 2013-14, down from 5.2% in the previous year.
Analysts said the contraction in manufacturing could drag down the annual growth in the services sector, which accounts for roughly 60% of GDP, to 6.9% in 2013-14 from 7% a year before. “The data have a message for the next government after the general elections — stimulate demand and fix manufacturing, or be a witness to low growth," said Madan Sabnavis, chief economist at CARE Ratings. He said talks about the bottoming out of the economic slowdown are premature now, at least until the recent clearances of projects bears fruit. Elevated inflation has dampened demand, while high borrowing costs have affected investment, he added.
The mining sector continues to perform badly and is expected to end this fiscal with a 1.9% contraction, compared with 2.2% slump a year before, reflecting the adverse impact of curbs on iron ore mining in Karnataka, Goa and Orissa. With the utilities sectors also faring badly, key inputs remained expensive and in short supply. A projected 6% expansion in the electricity sector from 2.3% a year earlier was a notable plus point.
A somewhat subdued growth rate of construction at 1.7% from 1.1% in 2012-13 and lower pace of expansion in trade, hotels, transport and communications also pointed to the fact that the services sector worsened the woes for the economy as it failed to offset the damage done by the industrial segments.
CII director general Chandrajit Banerjee said: “With demand not showing visible signs of a pick-up owing to weak consumption, investment and government expenditure, the green shoots of recovery have yet to become apparent.” The current growth numbers makes it imperative for the government to do more to