Opinion Could polls trigger spending push?
While on the face of it,the fourth quarter GDP reading of 4.8 per cent last fiscal may be higher than the upward revised 4.7 per cent in the third quarter
While on the face of it,the fourth quarter GDP reading of 4.8 per cent last fiscal may be higher than the upward revised 4.7 per cent in the third quarter,the jury is still out on whether growth has bottomed out. The latest data set points to the Indian economy moving from an investment-led downturn to a consumption-led trough,with investment demand continuing to remain tepid.
A look at the latest data shows that in the fourth quarter,the key indicators of passenger and freight movement through the railways the net tonne kilometres and passenger kilometres have shown a sharp decline in growth rates at 1.2 per cent and 2.8 per cent respectively in the fourth quarter of 2012-13,as against growth rates of 7.0 per cent and 7.9 per cent in the corresponding three months of the previous year.
Railway freight movement is a leading indicator of demand conditions in the economy. In the transport and communication sectors too,the sale of commercial vehicles was down 2 per cent,cargo handled at major ports contracted by 3.1 per cent,cargo handled by civil aviation sector was down 4.27 per cent and passengers handled by the civil aviation sector slipped 1.82 per cent in 2012-13.
Growth in the consumption sector declined to 3.8 per cent in the March quarter,from 4.6 per cent in the preceding quarter,something that analysts caution could be an indicator that the slowdown is now spreading from the corporate sector to the retail sector.
The broad consensus among analysts is that even though the March quarter GDP has exceeded the RBIs expectations,worries on the widening trade deficit especially in the wake of how the rupee is moving could prompt the central bank to pause on the repo rate front in its June 17 policy. Added to this are fears that the RBIs move on provisioning and debt recasting,announced Thursday,could compound the problems further because most companies are already overleveraged. So the new measures could cause additional stress in the system and growth could come under pressure.
There is a silver lining,though. The biggest contributor to an uptick in demand could come in as we get closer to the polls,considering that the government starts to up its spending about six to eight months before an approaching election. So at a time when the consumption and investment demand desperately needs an impetus,some uptick in government spending could be good news indeed.
Anil is a senior editor based in New Delhi.
anil.s@expressindia.com
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