India’s statistics office is likely to say in two weeks that growth this year will slump further to an 11-year low, undermining the government’s optimism that it would at least be flat at 5% on the back of a recovery in the second half. The advanced estimate for FY14 is set to come in below that level. The economy expanded 4.6% in the first half and would need to rise 5.4% in the second for growth to come in at 5%, which doesn’t look likely.
A reading below 5% is consistent with most private estimates that peg growth at 4.6-4.8%. Over the first eight-nine months, industrial production has turned negative, steel consumption growth has declined and auto sales have remained muted, indicating that the official growth forecast would hover at 4.5-4.7%.
Industrial growth went from 0.4% in the first six months to a negative 0.2% in the April-November period. Steel consumption growth has declined from 0.8% up to September to 0.5% between April and December. Auto industry data suggests that car sales remained under pressure, having recorded negative growth in 2013 for the first time in 11 years, at -9.6%.
Commercial vehicles, capital goods and freight, the early indicators of a recovery, have shown no signs of an uptick.
A normal monsoon and the resultant pickup in rural income is expected to boost the economy to some extent. Agriculture and banking will be the silver lining in the data.
In the first half of the fiscal, agriculture grew 3.6%.
Also, increase in government expenditure in the third quarter could help.
Though the government would look at curtailing expenditure in the fourth quarter to meet the fiscal deficit target of 4.8%, a large double-digit growth in government spending in the third quarter could lift up the GDP. The plan expenditure, which goes into community, social and personal services, grew by 35% in October and November against 16% growth in the first six months of the fiscal.
If the number is below 5%, the FY 2014 figure will be the lowest since 4% growth in FY03. Last year’s 5% growth was the lowest in a decade.
A reading below 5% is consistent with most private estimates that peg growth at 4.6-4.8%. Over the first eight-nine months, industrial production has turned negative, steel consumption growth has declined and auto sales have remained muted, indicating that the official growth forecast would hover at 4.5-4.7%.
Industrial growth went from 0.4% in the first six months to a negative 0.2% in the April-November period. Steel consumption growth has declined from 0.8% up to September to 0.5% between April and December. Auto industry data suggests that car sales remained under pressure, having recorded negative growth in 2013 for the first time in 11 years, at -9.6%.
Commercial vehicles, capital goods and freight, the early indicators of a recovery, have shown no signs of an uptick.
A normal monsoon and the resultant pickup in rural income is expected to boost the economy to some extent. Agriculture and banking will be the silver lining in the data.
In the first half of the fiscal, agriculture grew 3.6%.
Also, increase in government expenditure in the third quarter could help.
Though the government would look at curtailing expenditure in the fourth quarter to meet the fiscal deficit target of 4.8%, a large double-digit growth in government spending in the third quarter could lift up the GDP. The plan expenditure, which goes into community, social and personal services, grew by 35% in October and November against 16% growth in the first six months of the fiscal.
If the number is below 5%, the FY 2014 figure will be the lowest since 4% growth in FY03. Last year’s 5% growth was the lowest in a decade.
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