New Delhi: India’s GDP growth decelerated in the third quarter (October to December) of this fiscal to 4.7 per cent due to contraction in the manufacturing sector.
This means that India’s GDP is unlikely to touch five per cent in this fiscal as the finance ministry was hoping. With the dates for general elections to be announced soon, the slowing economy is not a positive sign for the government. The Gross Domestic Product had grown by 4.8 per cent in the second quarter (July to September) and 4.4 per cent in first quarter (April to June).
Earlier this month, Central Statistics Office (CSO) had projected that India’s GDP will grow at a low pace of 4.9 per cent in 2013-14. It will be second straight year when India’s GDP will grow sub five per cent. The GDP growth for the first nine months of the current fiscal (April to December) has come to around 4.6 per cent against 4.5 per cent in the same period last year.
In the third quarter, the manufacturing sector collapsed contracting by 1.9 per cent as consumer sentiments continued to remain weak. The sector had grown by 2.5 per cent in the same period last year.
During the period, the agriculture sector grew by 3.6 per cent against 4.6 per cent in the second quarter of 2013-14. The services sector grew by 7.6 per cent in the third quarter against 6 per cent in the second quarter of the current fiscal and 6.7 per cent in the first quarter.
“The fourth quarter growth would need to rise to 5.7 per cent to meet the CSO’s advance GDP estimate of 4.9 per cent. This appears challenging and could see a downward bias of around 20 basis points when the annual estimates are revised in June 2014,” said Citi in a research note.
On the expenditure front, gross fixed capital formation was in the red contracting by 1.1 per cent.
“Manufacturing growth was dampened by a persisting sluggishness in investment and consumption demand. Des-pite a healthy kharif harvest, domestic demand remained weak in third quarter, partly on accou-nt of the spike in food inflation during the festive season,” said Aditi Nayar, senior economist, ICRA. Crisil said that agriculture can positively surprise in the fourth quarter on the back of good rabi harvest.
