Sluggish manufacturing output has cast a cloud over a rebound in economic activities in FY14, raising concerns over achieving the 4.9 per cent GDP growth forecast for the last fiscal.
“There was expectation of some rebound in the economy in the second half of the fiscal but data on industrial output has been disappointing. This will have an impact on growth estimates,” said a senior official, while cautioning that calculations on gross domestic product growth for FY14 are yet to be completed.
According to advance estimates, GDP growth was forecast at 4.9 per cent growth in FY14 with a revival in the second half of the fiscal. However, with growth remaining subdued in the third quarter of last fiscal at 4.7 per cent, the fourth quarter will have to register at least 5.5 per cent growth to meet the target.
This, however, may be an uphill task given that factory output has not shown much revival. The index of industrial production dipped 1.9 per cent in February taking the cumulative growth in the first 11 months of FY14 to a negative of 0.1 per cent. Meanwhile, other sectors such as community, social and personal services, too, may witness muted growth due to spending checks by the government to meet its fiscal deficit target.
“Going by the industrial production data, the GDP forecast may be scaled down from the 4.9 per cent estimate. But sometimes IIP also tends to get revised upwards so we will have to wait and watch,” said DK Joshi, chief economist, Crisil. The agency has forecast growth at 4.8 per cent.
The economy grew at 4.5 per cent in FY13 and the government has been hoping for a revival in the economy to spur GDP growth to at least six per cent in the current fiscal.
The ministry of statistics and programme implementation will release provisional estimates of GDP in FY14 on May 30.
The Reserve Bank of India, too, has pointed out that while growth may have bottomed out, clear signs of recovery are yet to emerge.
“Growth at 4.7 per cent in Q3 of FY14 … has not been enough to suggest that the advanced estimates of 4.9 per cent during FY14 could be realised,” it said in the Macroeconomic and Monetary Developments 2014-15 on April 1.