Fiscal 2014 GDP growth estimate lowered to 5.5%

Policy constraints impacted growth in Q1

The Union Finance Ministry on Tuesday lowered its projections for the gross domestic product growth in 2013-14 to 5.0-5.5 per cent in its quarterly review (April-June) of the economy, much below 6.1-6.7 per cent projected earlier in the Economic Survey.

 “Updating the model for changes in the global and domestic macroeconomic environment, the real GDP growth is now likely to be 5-5.5 per cent in 2013-14," the review said.

 Assuming a normal monsoon and global economic recovery, the Economic Survey had anticipated the growth to be 6.1-6.7 per cent for 2013-14, the review said.  The review expects a U-shaped recovery for the economy, with the GDP growth expecting to pick up from Jul-September.  The review said,”... in contrast to expectations of a pick-up in economic activity, current macro trends indicate that a combination of global and domestic developments is likely to result in a shallow 'U'-shaped recovery in 2013-14."

"Following three quarters of sub-5 per cent growth, growth is expected to pick up from second quarter of 2013-14 resulting in full year growth of around 5.5 per cent," it said.

The Indian economy grew at 4.4 per cent in Apr-Jun, the first quarter of 2013-14 as against 5.4 per cent a year ago. The growth slowed down as a result of policy constraints that impacted investments, tight monetary policy and external headwinds, the review said.

 The review has projected the wholesale price index-based inflation at around 6.5-7.2 per cent in 2013-14.

 On headline inflation, the review said: "Based on current trends and the wearing of the base effect post October, WPI inflation is expected to be in the range of 6.5 to 7.2 per cent at the end of 2013-14."

 The agricultural and allied sector is expected to grow 4.5 per cent in 2013-14, even as the growth in the industry and services sectors may be weak.

 The review said the government will meet its fiscal deficit target of 4.8 per cent of the GDP for 2013-14, adding that the government aims to cut non-development expenditure to contain the deficit. On the current account deficit, the review said it would be safely financed and contained at $70 billion in 2013-14.