There seemed to be not as much shock as expected from the surprisingly low 4.8% GDP growth number recorded for the March quarter. While industry associations took the chance to remind the government of the need to ease money flow into the economy, Angel Broking even said the current year growth will be only 5.8%, compared to the 6.5% that the government seems to be expecting.
“The overall growth print for FY2013 is in line with our expectations. Growth in consumption, investment and exports has more than halved since its level in FY2012. Fiscal consolidation is also impacting growth in the short-term and this is corroborated by the slow growth in community, social and personal services at 4%, lowest in the past seven quarters.
“We do believe that growth is bottoming out but the recovery is likely to be gradual with a lagged pick-up in consumption and investment and we expect real GDP growth at about 5.8% going into FY2014. For the economy, the positives going ahead are likely to come from a sustained deceleration in headline inflation rates and improvement in indicators such as the current account deficit and fiscal deficit,” Bhupali Gursale, Economist – Angel broking.
INDIA FOREX ADVISORS
“Throughout the week we saw the rupee weakening against the US dollar and surpassing the key levels of 56-56.20 as per our expectations. Yesterday, the RBI’s reality check on the inflation and current account deficit jolted the sentiment of the investors on the Indian Rupee. India’s Q4 GDP figure has come in line with the market expectations. The figure is way below the Government expectation of 6.5% growth. This GDP numbers along with the upcoming inflation and IIP data will form a base for the RBI’s decision on the rate cut in its policy meet on 17th June. We continue to maintain our bearish bias on Indian Rupee and expect it to move towards 57-58 levels.”
“The Q4 GDP growth figures at 4.8 percent is disappointing, but on expected lines”, said Mr Chandrajit Banerjee, Director General, CII. “With no visible pick up in any key levers of the economy, the situation remains grim. Demand in the system is weak with low levels of consumption, government expenditure and investments. While the fiscal deficit situation would not allow government expenditure to go up, every means need to be explored for raising consumption and investment demand”, he added.
CII has been advocating further easing of the monetary policy with a reduction in repo rate and CRR. In addition procedural easing is required to get stalled investment projects in to the implementation stage.
The Cabinet Committee on Investments has been looking at clearing tranches of Rs 1000 crore plus projects. “However, a similar thrust is required for projects at the state level and also for sub Rs 1000 crore projects in the manufacturing domain. CII looks forward to some movement on issues such as assured coal linkages for the power sector, promoting competition in the mining sector, ensuring fast implementation of projects, reducing subsidies, among others, many of which require non-legislative action in the election year,” it added.
GDP growth which has fallen below five per cent for the fourth quarter of the fiscal 2012-13 is a strong indication that the turnaround of the Indian economy is still far away and there is a real reason for worry, requiring drastic measures from the government and the Reserve Bank of India (RBI), the industry body said today.
“While the agriculture sector is expected to change for better due to forecast of normal Monsoon, several other key segments of the economy such as manufacturing, construction, mining remain in a slippery zone in the face of receding consumer confidence and high inflation coupled with a deadly dose of high interest rates,” said Mr Rajkumar Dhoot, president of The Associated Chambers of Commerce and Industry of India.
“The biggest worry is on account of rupee which may slip further in case the foreign institutional investors get a cue from the GDP numbers for fiscal 2012-13 released today,” said Mr Dhoot. “The situation is fast changing for worse. Signals from the global economy are not encouraging either with IMF revising China’s prospects downward. Not very sure how long the party in the equity market induced largely by printing of notes by central banks in the rich countries will last, that calls for pulling the socks in our domestic market which needs to be revived along with consumer confidence.”
The ASSOCHAM Chief further said these concerns have rightly been reflected by RBI Governor Mr D Subbarao also. However, the RBI must further reduce interest rates while the Finance Ministry should allow the budgeted expenditure to be allocated and spent. “The government expenditure, when consumer confidence is low, can only revive the sentiment along with procedural clearances to some of the big ticket projects in the infrastructure sector.”
He said while revival is going to be a long drawn process unlike in the case of 2009, “Manufacturing revival is critical for the revival of services sector and employment generation.”