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Breaking down the Indian growth story

India’s economy grew 5.5% in the April to June quarter, confirming fears of a widespread slowdown caused by a demand and investment sque-eze from a host of factors that include local policy logjam, high interest rates and sluggish exports amid a euro zone crisis

business Updated: Aug 31, 2012 21:11 IST
HT Correspondent

India’s economy grew 5.5% in the April to June quarter, confirming fears of a widespread slowdown caused by a demand and investment sque-eze from a host of factors that include local policy logjam, high interest rates and sluggish exports amid a euro zone crisis

The growth in April to June is marginally higher than the previous quarter's 5.3% growth and a sharp drop the 8% recorded in the same quarter in the previous year.

“Overall, despite today’s sligh-tly higher GDP print, we believe that the underlying growth momentum remained weak with three critical drivers: private consumption, investment and exports leading the slowdown. Early data such as the manufacturing and exports suggest no pick up in sight,” said Sonal Varma, of broking and research firm Nomura.

Experts blamed domestic uncertainty behind the sudden turnabout in the economy, which until recently was the destination global investors flocked to.

Gross fixed capital formation, a proxy for investment activity, is down to 32.8% of GDP (at constant prices) compared to 33.9% last year.

Private consumption has remained flat 59.5% of GDP (at constant prices) in the same quarters of both 2011-12 and this year.

Basic goods output growth, which comprises of infrastructure sectors such as crude oil, natural gas, petroleum refinery products and fertilisers, appear to be slowing down considerably with the growth rate of eight infrastructure sectors plunging to.1.8% in July, down from 8.2% in July 2011, and at its lowest level in nine months.

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