India’s economy is set to grow at 4.9% during 2013-14, marginally higher than last year’s 4.5% crawl, but not fast enough to suggest a sharp turnaround needed to combat a toxic mix of high prices and crippling industrial deceleration in an election year.
India’s gross domestic product (GDP) — the total value of all goods and services produced within the country’s boundaries — has now grown at below 5% for the second successive year, mirroring the sharp turnabout in the economy that had sizzled at more than 8% for five of the last 10-years.
The advance estimates of the GDP put out by the Central Statistics Office (CSO) show how factories are producing less resulting in fewer jobs. This, along with high prices, has resulted in the slide in the economy, which until recently, was an engine for global growth.
Despite the sharp deceleration over the last two years, India’s GDP grew at an average of 7.6% between 2004-05 and 2013-14, the 10 years of UPA rule, second only to China and far higher than the US and European countries.
Finance minister P Chidambar-am was confident that the final estimates would peg growth figures at above 5%. “I am confident the final estimate will be not less than 5% for the whole year,” he told PTI.
The farm sector, propped by a monsoon-aided bumper harvest, is set to grow by 4.6% in the current fiscal from last year’s 1.4%.
A sharp jump back in factory output and a robust turnaround in the services sector, which accounts for more than two-thirds of the economy, is critical to arrest the deceleration.
The construction sector, the lifeblood of critical industries such as cement and steel and the income source for millions of daily-wage earners, is forecast to inch at 1.7% during the year, marginally higher than last year’s 1.1%.
The manufacturing sector is set to fall by 0.2%, the first such contraction since 1991-92 demonstrating the rather muted activity across millions of factories.
“The investment pipeline has completely depleted and fresh investments by the private corporate sector are unlikely unless there is a sustained recovery in demand,” credit rating and market research firm Crisil said in a report released Friday.