India economy registers weak growth
New Delhi, June 1, 2013
India's economy began a feeble recovery in the first quarter of 2013, but weak private consumption, capital investment and slowing public spending offered little hope for a fast rebound in coming quarters.
Asia's third largest economy grew an expected 4.8 per cent from a year earlier in the January-March quarter, slightly faster than an upwardly revised 4.7 per cent growth in the previous three months, which was the lowest in fifteen quarters.
But the better headline GDP number was largely down to a statistical base effect rather than any substantial improvement in economy.
The data will offer scant relief to Prime Minister Manmohan Singh as his government heads into a busy election period dogged by graft scandals and criticism of its economic management.
Two quarters in a row of sub-5pc expansion meant the economy recorded decade-low growth of 5 per cent in the fiscal year 2012/13 (April-March), in line with an official forecast given in February.
"We don't see any dramatic turnaround soon," said Aninda Mitra, India economist at Capital Economics in Singapore, who expected economic growth to range between 5-6 per cent until next year.
This is disappointing for an economy that recorded 9pc annual expansion until two years ago and was widely expected to be one of the main drivers of the global economic recovery. It also poses a challenge for the octogenarian Singh to generate enough employment opportunities for a young, growing workforce.
In a sign of underlying weakness in the economy, April infrastructure output growth slowed down to 2.3 per cent year-on-year from 3.2 per cent expansion in March.
Infrastructure output measures items such as coal, oil, steel and electricity and accounts for 37.9 per cent of India's industrial production, which grew just 1 per cent in 2012/13 and was largely responsible for the overall growth slowdown.
Public spending growth slowed to an annual 0.6 per cent during the quarter from 2.2 per cent a quarter ago after Finance Minister P Chidambaram slammed the brakes on public spending to retain India's investment-grade sovereign rating.
His belt-tightening helped New Delhi narrow the fiscal deficit to 4.9 per cent of GDP in 2012/13, below a revised official estimate of 5.2 per cent and much lower than 5.8 per cent a year ago, data showed yesterday.
But worryingly, growth in capital investment and private spending also slowed down.
Annual capital investment growth dropped to 3.4 per cent in the March quarter from 4.5 per cent year-on-year a quarter ago, in large part because of regulatory bottlenecks that hit investment in mining, roads, ports and power.
Meanwhile, the Reserve Bank of India's has cut its policy rate by a total of 75 basis points since January to spur economic recovery.-Reuters