Economy slows down to 2-yr low
But for services doing well, the performance could have been worse
India’s economy grew 6.9 per cent in the second quarter (June-Sept), at its slowest pace since mid-2009, due to manufacturing and mining sectors lagging, but services, with an impressive 9.3 per cent growth, provided a saving grace.
Manufacturing, which contributes nearly 16 per cent to the gross domestic product (GDP), slid to 2.7 per cent compared with 7.8 per cent a year ago, while mining and quarrying output declined by 2.9 per cent as against 8 per cent in same quarter last fiscal.
The slowdown in GDP figures for consecutive two quarters prompted Finance Minister Pranab Mukherjee to lower the current financial year’s economic growth projection to 7.3 per cent from the budgeted 9 per cent.
“The GDP growth at 6.9 per cent is no doubt below my budget projection. But after the presentation of the budget, there was international financial crisis, slow growth in Europe and America... problems within the country and outside as well,” Mukherjee told a press conference.
He, however, said, “We shall have to try to face the situation and to see what best we can do at this given situation.”
The slow pace of economic reform and a series of graft charges against the government has hurt investor sentiment, affecting foreign investment, while the fall in manufacturing sector clearly indicates a slow down in economic activity across the country.
High inflation and high interest rates have put pressure on demand and hence on industrial expansion. Further, a gloomy global economy and debt-ridden Europe have hurt demand for exports.
Cumulatively, all such factors exerted pressure on economic growth, slowing it down to 7.7 per cent in the first quarter (April-June) this year from 8.8 per cent in the same quarter last year. And the growth rate further slipped to 6.9 per cent in July- September, data for which was released on Wednesday. GDP growth in the second quarter last fiscal stood at 8.4 per cent.
Agriculture output, too, slipped to 3.2 per cent from 5.4 per cent in the corresponding period last fiscal, despite a good monsoon.
Dr C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, exuded confidence that growth would be better in the third and fourth quarters on expectations of improved performance of agriculture, but Chief Economic Advisor Kaushik Basu said policy decisions needed to be fasttracked. “Slow government decisions also hurt growth,” he said. Basu said although the medium to long-term growth prospects were good, some fiscal slippage was possible in the current financial year.
Planning Commission Deputy Chairman Montek Singh Ahluwalia hoped growth would pick up in third and fourth quarters but said improvement in investment climate in the country was a critical need. “We should definitely try for rebound in the next fiscal. The key to that rebound is getting investment back on track, particularly in infrastructure,” he said.
