Economy grew 4.7% in Q3, dashes hopes of recovery

Fifth consecutive sub-5 per cent growth

India’s economic growth slowed to 4.7 per cent in October-December quarter backed by a contraction in manufacturing and mining sector and less than expected growth in agriculture. This is the fifth consecutive quarter of a sub-five per cent growth in the economy, a number which does not bode well for the government to go into elections with.

While manufacturing contracted by 1.9 per cent, mining and quarrying shrank by 1.6 per cent. Growth in agriculture slowed to 3.6 per cent from 4.6 per cent in the previous quarter.

The only exception were the services sector. In that too financing, insurance, real estate and business services did well, growing at 12.5 per cent but others like trade and hotel services grew only at 4.3 per cent and construction activities, a meagre 0.6 per cent.

The data from expenditure side was even more disappointing. While gross fixed capital formation  shrank by 1.1 per cent, private final consumption expenditure registered growth of just about 2.5 per cent.

Analysts said, the cut in plan expenses in the fourth quarter will dent growth prospects going forward in the next quarter or two.

While contraction in mining and manufacturing was expected, the big disappointment came from construction, a sector that has acted as a magnet which has been pulling the rural labourers away to urban centres.

Only a robust growth in agriculture sector in the fourth quarter can lift the GDP growth rate to officially estimated 4.9 per cent for 2013-14.

"These numbers indicate that the slowdown is entrenched in the economy and we may have to wait to see if lack of growth has really bottomed out. This prolonged slowdown in growth will have serious implications for employment generation and unless the trajectory is reversed soon we could face grave social challenges," trade body Ficci said in a statement.

“The festive season of October and November has not done enough to reverse the slowdown and that causes additional concern. The fact that the current figures are over a favourable base effect, compounds the problem.

In fact, today’s figure would erode some of the cautious optimism that was starting to become visible over the last two months,” trade body Confederation of Indian Industry said.

The Assocham said, “manufacturing is actually bleeding with a compression in demand and low consumer confidence. It must be lifted. Only then, will investment take place… The eye is clearly on the new government”.