A long haul
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GDP data frames the first signs of growth bottoming out. Recovery will need resolve to stay the course
Looking for signs of an uptick in the Indian economy at this point is an exercise in hope while evidence of the deceleration is strewn all around. Consumption expenditure in the private sector and capital formation are still wobbly but the fiscal deficit numbers for October show some evidence of the government consolidating expenditure in the economy. It is a long way to a clear recovery but these could be the first signs that growth deceleration may have bottomed out in the economy. To expect the growth rate to travel sharply upwards from here is, however, to be more optimistic than what the data warrants. The 5.3 per cent GDP growth rate for the second quarter of 2012-13 means the economy has grown at just 5.4 per cent in the first six months of the year. To reach the RBI projected 5.8 per cent growth rate for the year means the economy would have to clock an average of 6.2 per cent in both the December and March quarters. On the way, it will have to counteract the recessionary conditions in Europe and a US economy swinging between recovery and another recession.
A close look at the GDP data released by the Central Statistics Office on Friday shows there is no clear demonstration that any sector is firmly set towards recovery. A manufacturing sector that is growing at less than 1 per cent does not even make the cut as a turnaround candidate. In all the high growth years of 2003-08, the sector was logging at least 8 per cent. Electricity and construction, which had shown a rebound in the first quarter of the year, have slipped again. The comparative report card for the first two quarters of the year shows Indians are still stocking up on gold and inventory is growing unacceptably high. The spasmodic nature of the data is the reason why the estimates of the growth rate for the economy vary so widely between the OECD figure of 4.4 per cent to Goldman Sachs's 6.5 per cent.