The Indian economy has grown by less than 5 per cent for two consecutive years. The advance estimate of GDP released by the Central Statistics Office shows growth at 4.9 per cent in FY 14. The last time India had consecutive years of sub-5 per cent growth was in FY 88, a quarter century ago.
The numbers show that the economy has performed better in the second half of this year — 5.2 per cent against 4.6 per cent in the first half. Growth has been in sync with recent estimates by the Reserve Bank of India.
T C A Anant, the government’s chief statistician, said there were clear signs of revival in growth in the second half of the year. A revival from here on will arrest the downward slide, but a return to a 7 per cent-plus rate will take more than a year, said D K Joshi, chief economist at Crisil. The agency expects the economy to recover somewhat in the next fiscal, growing at 6 per cent.
Joshi said that had the GDP data for the last fiscal not been revised downward, “these numbers would have been worse”. The government last month isssued the final GDP data for FY 13, which put growth at 4.5 per cent.
Manufacturing and mining have been the worst performing sectors.
According to the advance estimates, agriculture is estimated to grow at 4.6 per cent this fiscal compared to 1.4 per cent last fiscal. But manufacturing is expected to shrink 0.2 per cent in this financial year compared to a growth of 1.1 per cent in the previous year. Mining is likely to contract 1.9 per cent; it declined 2.2 per cent in 2012-13.
While the good monsoon helped spur farm sector growth, analysts have blamed high borrowing costs and policy uncertainty for the slowdown in economic activities.
“There has been a considerable loss in optimism, and we urgently need to prop up growth in the manufacturing sector… Principles of sound governance, clear policies and effective implementation should be adhered to. Also, there is a need to shift to time-bound decisions over time-bound actions,” industry body Ficci said.
Gross Fixed Capital Formation, an indicator of investment, is projected at 28.5 per cent this fiscal compared to 30.4 per cent a year ago. “The rate of expenditure on valuables at current prices has gone down from 2.6 per cent in 2012-13 to 2.1 per cent in 2013-14,” the CSO said.
Private and final consumption expenditure is likely to remain stable at 57.1 per cent and 12.1 per cent respectively. Reflecting the slowdown, the advance estimate indicates that India’s per capita income is likely to grow 2.8 per cent to Rs 39,961 in 2013-14.
RBI in its quarterly review last week said the weakening of private consumption and investment demand had dampened prospects of a second-half pick-up in GDP growth.
“On current reckoning, growth in 2013-14 is likely to fall somewhat short of the Reserve Bank’s earlier projection of 5.0 per cent,” it said in its report on macroeconomic and monetary development on January 29.