GDP grows 5.3%, 10-yr low ahead

Gross fixed capital formation up at 4.1%

GDP grows 5.3%, 10-yr low ahead

India’s economy grew 5.3 per cent in July-September quarter on the back of poor showing by agriculture, manufacturing, industry and services sectors, dampening government’s expectations of achieving 6 per cent growth in 2012-13.

To add to its woes, the fiscal deficit figures released by the government for April-October, 2012 stood at 71.6 per cent of the budgetary target for the financial year. It rose to Rs 3.68 lakh crore, raising concerns about its ability to reign in fiscal deficit at the targeted 5.3 per cent this year.

The only proverbial silver lining was the gross fixed capital formation, which increased to 4.1 per cent in the second quarter compared to 0.7 per cent in the preceding quarter. The rise implies an uptick in investment activities.

While the manufacturing sector grew 0.8 per cent as against 2.9 per cent year-on-year, agricultural output rose 1.2 per cent during the quarter, down from 3.1 per cent the previous year. The services sector, the mainstay of the Indian economy, was 7.2 per cent, down from 8.8 per cent last year; industry 2.8 per cent from 3.7 per cent.

Planning Commission Deputy Chairman Montek Singh Ahluwalia and Prime Minister’s Economic Advisory Council Chairman C Rangarajan too expressed disappointment over lower than expected growth rate, but hoped for a turnaround in the economy going forward, which could lead up to 6 per cent for the full year.

"It will be between the two, because in order to get 6 percent we really need very strong growth in the second half," Rangarajan told a TV channel.

A growth rate below 6 per cent for the third quarter in a row is damaging for a country that aspires to at least 8.5 per  cent expansion to provide jobs for its burgeoning population, and makes it tougher for Singh to fund flagship welfare programmes.

Experts, however, differed with the government’s and policy makers’ views. Economist at public sector lender State Bank of India, Brinda Jagirdar said, “The average growth rate for the first and second quarters together is 5.4 per cent. To achieve 6 per cent for the fiscal as a whole, the growth rate for the next two quarters has to be over 6 per cent.”

Stock markets ignored the sluggish GDP growth numbers; the benchmark BSE Sensex rose 169 points to close at 19,354 points.

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