GDP slows down to 5.3% in July-Sept quarter; in-line with estimates

Alarming the urgency of politically difficult reforms to spur a revival in Asia's third- largest economy, India's gross domestic product (GDP) growth further slowed down to 5.3% in the second quarter (June-September) of 2012-13 compared with three year’s low figure of 5.5 per cent in the first quarter.  

Further, quarterly GDP at factor cost at constant (2004-05) prices for Q2 of 2012-13 came at Rs 12, 93,922 crore as against Rs 12, 28,982 crore in Q2 of 2011-12, showing an increase of 13.6 per cent.  The gross domestic product (GDP) had expanded by 6.7 percent in the same period of last fiscal. The economic growth in the first six month of this fiscal (April-September) stood at 5.4 percent, lower than 7.3 percent growth clocked in the year-ago period.

Growth was mainly dragged down by subdued manufacturing and farming output growth. During the three-month period ended September 30, the manufacturing sector grew marginally by 0.8 percent, against 2.9 percent growth in the same period of 2011-12. Further, farm sector output expanded by just 1.2 percent in the July-September period this fiscal against 3.1 percent in the same period last year. Meanwhile, for the other economic activities, the growth rate of electricity, gas and water supply dipped to 3.4 percent in the second quarter, from 9.8 percent witnessed in the corresponding period a year ago.

Further even growth rate of services sector, including insurance and real estate, slowed down at 9.4 percent in the second quarter, against 9.9 percent recorded in same quarter last fiscal. On the flip side, mining and quarrying sector, however, showed some improvement and recorded a growth of 1.9 percent during the quarter, as against a contraction of 5.4 percent in the second quarter of 2011-12. Additionally, construction sector expanded by 6.7 percent in Q2 of 2012-13, as against 6.3 percent in the year-ago period.

Meanwhile, the gross fixed capital formation (GFCF), a measure of investments, at current and constant (2004-05) prices during Q2 of 2012-13 are estimated at 30.6 per cent and 33.8 per cent, respectively, as against the corresponding rates of 30.9 per cent and 33.4 per cent, respectively in Q2 of 2011-12. In terms of GDP at market prices, the rates of Private Final Consumption Expenditure (PFCE) at current and constant (2004-05) prices during Q2 of 2012-13 are estimated at 58.3 per cent and 60.8 per cent, respectively, as against the corresponding rate of 57.8 per cent and 60.3 per cent, respectively in Q2 of 2011-12.

Battling with weak consumer demand in overseas and domestic markets, the economy’s growth figures although has come more or less in line with estimates, but are still stuck near three year low. The slowing economy has already battered government revenues, leaving the government scrambling for ways to balance the budget and avert a credit rating downgrade threatened by ratings agencies Standard & Poor's and Fitch. Further, this slump also makes it difficult for Prime Minister Manmohan Singh to fund flagship welfare programmes ahead of the general elections due in mid-2014.