Country’s first quarter Gross Domestic Product (GDP) data released on Friday by the Government reported a fall in economic growth for the April-June quarter of FY14 at 4.4 per cent as against 5.4 per cent in the same quarter in the previous fiscal.
Dragged down by a contraction in manufacturing and mining, economic growth stood at the slowest pace in the last four years. On a sequential basis, the growth rate declined from 4.8 per cent in the January-March period of 2012-13. Mining and quarrying contracted by 2.8 per cent in the April-June quarter against a 0.4 per cent growth in the same period of the last fiscal, according to data released by the Central Statistical Organisation (CSO) on Friday.
The manufacturing sector posted a contraction of 1.2 per cent as against a decline of 1 per cent in output a year earlier. Other sectors, including construction, power generation, hotels and transport, showed a marked deceleration in growth. Farm sector output expanded by 2.7 per cent in April-June compared with 2.9 per cent in the corresponding period of the last fiscal. Growth in electricity, gas and water supply was 3.7 percent in the April-June quarter compared with 6.2 per cent in the same quarter of 2012-13.
The construction sector expanded 2.8 per cent as against 7 per cent in the year-ago period. The trade, hotels, transport and communications segment grew at 3.9 per cent against 6.1 per cent. The growth rate in the services sector, including financing, insurance and real estate, stood at 8.9 per cent against 9.3 per cent in same quarter of 2012-13.
Community social and personal services registered a growth of 9.4 per cent compared with 8.9 per cent. Commenting on the data, Economic Affairs Secretary Arvind Mayaram said, “Growth in the second quarter will improve and growth in the third and fourth quarters would be better.”
While FICCI President, Naina lal Kidwai expressed concerns over the depreciation in the currency and said, “The economy continues to tread in difficult waters as many challenges remain on the fore. The precariousness displayed by Rupee has raised concerns afresh on the external front, industrial growth continues to face deceleration, and the investment cycle is yet to kick off. The Gross Fixed Capital Formation registered a negative growth of 1.2 per cent in Q1 FY14 as compared to 3.4 per cent growth in Q4 FY13. Understandably there is no perfect recipe to steer out of the current state of affairs but what we need is swift action given the volatile situation.”
On the other hand CII, Director General, Chandrajit Banerjee said, “The GDP figures for first quarter clearly show that the economy continues to be in the throes of a slowdown. The concern becomes more acute when we see that at the present moment, there are no clear indications that the economy has bottomed out. With monsoons being normal, a good agricultural performance coupled with rise in rural wages would help bolster rural demand. But, that by itself is not adequate, when the other indicators are all southward bound. We do not wish to sound alarmist, as there are enough panic reactions visible around us, particularly on the rupee, but the concern on the economy can hardly be overstated. The economy needs undivided attention of policy makers.”
Further commenting on the investment situation, Banerjee said that there are no visible signs of investment pick up as investor sentiments continue to be very low. A weak rupee, tight liquidity, high cost of funds, procedural delays, etc are all coming in the way of an investment revival.
Apart from the GDP numbers, another important data of the current account deficit was also released on Friday. The deficit stood at Rs 3.40 lakh crore in April-July period, which was nearly 63per cent of Rs 5.42 lakh crore pegged in the Budget, according to data released by the Controller General of Accounts (CGA).