Friday, August 30, 2013

India\'s economic growth slumps to 4.4%, fiscal deficit bites



Saturday, Aug 31, 2013, (7STAR NEWS)| Place: Mumbai |India's economic growth fell to a four-year low of 4.4% in the quarter ended June as manufacturing and mining activity shrunk, data showed on Friday.



The gross domestic product (GDP) was up 5.4% in the same period last fiscal and 4.8% during the last quarter.



To make matters worse, fiscal deficit for the April-July period came in at Rs 3.4 lakh crore, or 62.8% of the target set out by the government for the full year. The net tax receipts for the period stood at Rs 1.45 lakh crore and the total expenditure at Rs 5.21 lakh crore.



Slowdown in consumption threw a nasty surprise on an economy already suffering because of a dull investment climate, though government spending saved the day. Without this, first-quarter GDP growth would have been lower at 4%.



Growth of the manufacturing and mining industries fell by 1.2% and 2.8%, respectively.



However, there was an increase of 9.4% in the community, social & personal segment. Financing, insurance, real estate & business services were up 8.9% compared with the same quarter last fiscal.



"Government spending was a significant driver of growth as private consumption growth weakened further to 1.6% and investments fell by 1.2% compared to a year ago amidst lack of policy reforms, procedural delays and persistent supply-side bottlenecks," said economists Dharmakirti Joshi and Neha Duggar Saraf at Crisil.



Services industry showed a growth of 6.6% and agriculture sector activity rose 2.7% during the first quarter.



Though macroeconomic conditions suggested a lower GDP growth print compared with last year, it was not expected to be this dismal.



CRISIL pointed out that India's economic recovery seems to be following a L-shaped trajectory in line with the sharp V-shaped one post Lehman crisis.



But going forward, recovery may be slower than expected, said Anis Chakravarty, senior director at Deloitte, India. Quarterly GDP is unlikely to look up unless structural deficiencies in the industrial sector are addressed, he said.



"We believe that the outlook for growth is likely to continue to remain challenging through current financial year, particularly in light of the liquidity tightening measures taken by the RBI to contain exchange rate volatility and absence of meaningful impetus to growth," said Bhupali Gursale, economist, Angel Broking.



Economists at Religare Securities concurred. "Our 4.5% overall GDP growth estimate for current financial year faces significant downside, unless things improve meaningfully on the rupee and global front," Tirthankar Patnaik, Prerna Singhvi and Saloni Agarwal said in a note on Friday.
News From: http://www.7StarNews.com

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