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Positive signs

Last Updated 03 December 2013, 18:13 IST


If the GDP growth rate of 4.8 per cent during the second quarter generates hopes of a turnaround in the economic growth prospects, they are exaggerated.

But they might mark a stabilisation of the economy and show that the worst period of slide may be over. The growth during the July-September period was slightly higher than the 4.4 per cent of the first quarter. This was expected because the better performance of the sectors which contributed to the uptick was evident during the period.  A good monsoon helped agriculture to grow by 4.6 per cent. Exports went up on the back of a depreciating rupee which made them more competitive in the world market. Manufacturing supported it to an extent when it rose by one per cent against a decline of 1.2 per cent in the previous quarter.

The growth of the agricultural sector might continue but there is the need to watch the performance of other sectors. The advantage of cheaper rupee many not last as it has already appreciated from the lowest levels. So exports will have to be given greater boost by manufacturing and industrial sectors. There are faint indications of increase in productive capacity. Fixed capital formation is at a higher level and this might indicate that investment activity can pick up. But the problem of credit availability might continue as inflation is high and the RBI might not relent on its monetary stance very  soon. The government consumption expenditure in terms of community and social services declined during the period.

It will be a major challenge to maintain the increase in growth in the coming quarters. Fiscal situation is still bad and might get worse in the pre-election period because of likely increase in government spending. The world economy has also to sustain the growth signals for exports to improve further. More importantly the investment projects which were recently cleared by the government will have to be followed up and implemented. Some of them might get stuck in legal and bureaucratic difficulties. Problems in the mining and power sector will also call for remedial attention. The government had hoped for a 5.5 per cent growth for the whole year. This will be impossible unless the coming months see a major leap of growth. It must be ensured that there is no slippage again.

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(Published 03 December 2013, 18:13 IST)

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