GDP growth falters - a concern to be addressed...!!

GDP growth falters again, headed for decade-low

Economy grows 5.3% in second quarter FM blames it on kharif crop impact

BS Reporter / New Delhi Dec 01, 2012, 00:40 IST The economy grew 5.3 per cent in the second quarter (July-September) of this financial year compared with the year-ago period, keeping it on track for its worst year in a decade.Official data released on Friday showed the GDP growth was even below the 5.5 per cent posted for the three months ending in June but equal to that in the quarter ending March. The government’s worry was evident from the statement of C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council. Rangarajan on Friday scaled down his earlier forecast and said the full-year growth would be between 5.5 and 6 per cent. Growth was dragged down by subdued manufacturing output growth of 0.8 per cent and agricultural output of 1.2 per cent.(KEY SECTORS A DRAG ON ECONOMY) Terming the GDP growth as below his expectations, Finance Minister P Chidambaram said the reduction in growth in agriculture and allied sectors had been on account of rainfall being lower than normal, particularly in June-July. Poor kharif crop had pulled down the growth rate.The economy would have to grow by over 6.5 per cent in the second half to end the year at six per cent growth, economists said. “That seems a tall order. We are headed for a 10-year low GDP growth this year,” one economist said.Reaction to the GDP numbers was muted from financial markets, which were still cheering the end of a deadlock in Parliament and expectations of a rate cut from the Reserve Bank of India — a possibility that was ruled out by most economists, as inflation at more than seven per cent is above the regulator’s comfort zone.A positive sign was a pick-up in the fixed investment rate — 4.06 per cent in Q2, against 0.66 per cent in Q1. Gross fixed capital formation grew 4.06 per cent this quarter, as against 0.65 per cent in the first quarter. However, this could be attributed to the low base of last year, when growth in gross fixed capital formation slowed to 5.5 per cent in Q2 from 14.66 per cent in Q1.The low base of 6.7 per cent in Q2 of 2011-12 could not lift GDP growth in July-September, suggesting sluggish economic activity, economists said.Electricity generation slowed to an eight-quarter-low of 3.5 per cent. Mining showed growth of 1.9 per cent in the second quarter against 0.1 per cent in Q1 of 2012-13. Construction grew 6.7 per cent against 10.9 per cent in the previous quarter and 6.3 per cent in the corresponding quarter of 2011-12. Financing, insurance, real estate and business services expanded 9.4 per cent against 10.8 per cent in Q1 and 9.9 per cent in Q2 of 2012-13.The government’s final consumption expenditure expanded 4.06 per cent in Q2 against 5.02 per cent in Q1. This led to the fiscal deficit touching 7.36 per cent of GDP in the first half of 2012-13. http://www.businessstandard.com/india/news/gdp-growth-falters-again-headed-for-decade-low-/494222/