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India's GDP records sub 5% growth for second successive year; grows by 4.6% in Q4

31 May 2014 Evaluate

Hurt by policy delays, high inflation and the global slowdown, India’s economy recorded a sub 5% for the second successive year as it expanded by 4.7% in 2013-14, shade below the original estimate of 4.9% but slightly above the 4.5% growth in 2012-13. However, the industry is hopeful of a rebound with a stable government headed by Narendra Modi, considered pro-business.

The economy’s growth remained subdued at 4.6% in the fourth quarter of 2013-14 and during the entire fiscal, mainly due to a decline in manufacturing and mining output. The manufacturing sector continued to remain under stress, declining 0.7% year-on-year in 2013-14 compared with de-growth of 0.2% in 2012-13 on account of the impact of weak domestic demand outweighing the benefit from rising exports. The mining and quarrying sector, which suffered the brunt of policy delays, shrank 1.4% year-on-year in 2013-14 as against the Advance Estimate de-growth of 1.9%.

However, the uptick seen from the previous year was mainly on account of a smart rebound in the farm sector, which grew an annual 4.7% compared with a 4.5% expansion in the year earlier period. Meanwhile, the key construction sector registered growth of 1.6% as compared to 1.7% in the Advance Estimates, per capita net national income in real terms (at 2004-05 prices) in 2013-14 was estimated to have attained a level of Rs 39,904 compared with Rs 38,856 in 2012-13, while at current prices during 2013-14 estimated to have climbed to Rs 74,380 from Rs 67,839 in 2012-13, a rise of 9.6%.

Notably, Gross Fixed Capital Formation (GFCF), a barometer of investment at current prices, stood at Rs 32.11 lakh crore in 2013-14 as against Rs 30.72 lakh crore in 2012-13, while at current price was estimated at Rs 20 lakh crore in 2013-14 as against Rs 20.02 lakh crore in 2012-13.

In seven of the last eight quarters, India’s GDP has grown at less than 5%, hit by a toxic mix of high inflation, costly loan rates and poor services and industrial sector growth. Higher prices have hurt family budgets hard, especially at a time when thousands of firms have offered meager salary hikes and are holding back expansion and hiring. Besides, high inflation has propelled the Reserve Bank to raise lending rates. Thus, FY ‘2013-14’ too failed to see any revival of the economy. However, decisive mandate in the just concluded general election has bolstered investor confidence and raised expectations of fast-paced decision-making and economic reforms.

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