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Offline TechShristi

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Economy slows further, Q4 GDP growth at 9-year low
« on: May 31, 2012, 10:31:40 PM »
Economy slows further, Q4 GDP growth at 9-year lowSource:business today


India's growth has slipped and how - from an 8.0 per cent growth rate at the start of FY12, to 5.3 per cent in the fourth quarter. It's a shocking and a disappointing close to a year which saw the world change, once again. If the Lehman Brothers crisis in 2008 showed what greed in the private sector can do; the Euro Zone crisis (which has been partially blamed for the wobbly situation in India) showed that the excess generosity of governments can do more damage than good to the economy.

The same principle, coupled with a lack of will to push through reforms  and a volatile global environment , is hurting India. A closer look at the numbers shows a constant decline in investment activity.  Investors are wary of investing and businesses are holding back investments, which is one of the key reasons for the fall in the growth rate.

While the growth number may seem like a big disappointment, some industry observers said they weren't shocked at the dismal number. "This decline in growth is not surprising as FICCI had forewarned in April that the Q3 growth did not represent the bottoming out of the economy", said Rajiv Kumar, Secretary General, FICCI, in a statement.

A quick look at the numbers:

- The Gross Capital Formation (investments) registered a growth of 5.3 per cent in FY12, down from 11.1 per cent last year. The finance minister called the growth rate the "lowest in contemporary period."

- Manufacturing grew at a tepid 2.9 per cent during 2011-2012 as against the growth rate of 4.1 per cent during April-November, 2011. Growth rate for the sector has been revised downwards to 2.5 per cent from an advance estimate growth of 3.9 per cent.

Stubbornly high inflation led to high interest rates; the lack of any constructive policy action to cut the burgeoning subsidy bill has pushed investors and businesses into a corner.

It might come as a consolation that India is still recording higher growth than most parts of the world. But that argument has been repeated so often that it's starting to sound like it comes from the beginning of a debate class.

There is an acknowledgement from within the government that India faces a serious problem of twin deficits - fiscal deficit and current account deficit - and that we need to get our act together fast. The chairman of the Prime Minister's Economic Advisory Council (PMEAC) has repeated the need on multiple occasions. Even the finance minister promised to bring down India's subsidy bill to below 2 per cent this Budget - although that promise wasn't kept.

India's imports continue to grow at a much faster pace than its exports and the volatile rupee has clearly not helped; there has been no real action towards cutting the subsidy bill, except a hike in petrol prices.  Meanwhile the subsidy on diesel (one of the biggest drains on the subsidy bill) remains untouched.

Dr Rangarajan, Chairman of PMEAC, said that a good monsoon might spur agricultural production, as well as boost the manufacturing and services sectors.

Maybe it's time to pray to the rain gods - from the track record so far they might be better at delivering results.

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Economy slows further, Q4 GDP growth at 9-year low
« on: May 31, 2012, 10:31:40 PM »

Offline Mr. Patel

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Economy slows further, Q4 GDP growth at 9-year low
« Reply #1 on: May 31, 2012, 10:31:40 PM »
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Economy slows further, Q4 GDP growth at 9-year low
« Reply #1 on: May 31, 2012, 10:31:40 PM »

 
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