As the scam-hit UPA Government entered the 10th year of its rule at the Centre, its poor performance has reflected in the sinking economic growth. The GDP slipped to a decade-low of 4.8 per cent in 2012-13, primarily due to contractions in the services sector, as per the data released by the CSO on Friday.
The dip in the services sector is likely to impact jobs market. And immediate improvement in its growth can’t be foreseen in the near future, said experts.
Growth rate in services sector, including insurance and real estate, stood at 9.1 per cent in the fourth quarter against 11.3 per cent in same period in 2011-12. The segment grew only by 8.6 per cent in 2012-13 compared to 11.7 per cent in 2011-12.
The scenario is in sharp contrast to the 8.2 per cent GDP growth during 2003-04 (NDA was in power) — the fiscal year which had just ended when the UPA came to power for the first time in May 2004. In fact, at that time, the economy had more than doubled from 4 per cent growth in 2002-03.
Not only the GDP growth is sluggish, it has left an impact on the rupee, which closed on Friday at an 11-month low of Rs56.49 against the US dollar. The Sensex too fell sharply by 455 points— biggest in 15 months — and wiped out Rs1.1 lakh crore of investors’ worth.
Stocks in realty, oil & gas, banks, FMCG and PSUs bore the brunt of selling as 12 out of 13 indices closed down. Sensex resumed lower and remained in negative terrain throughout the day to settle at one-week low of 19,760.30.
Positively speaking, the dismal GDP growth could give rise to hopes of a cut in key rates by the RBI, which is expected to conduct its mid-quarter policy review on June 17. In its last review, the central bank had cut the key interest rates by 0.25 per cent.
Adding to the woes, growth in eight infrastructure industries slowed to 2.3 per cent in April mainly due to contraction in crude oil, natural gas and fertiliser output. The core industries had expanded at a rate of 5.7 per cent in the same period last year.
The combined index of the eight core industries — coal, crude oil, natural gas, petroleum refinery products, fertilisers, steel, cement and electricity — was 152.2 in April 2013 with a growth rate of 2.3 per cent, according to an official data.
“The decline in the growth rate in April, 2013 was mainly on account of negative growth in crude oil, natural gas and fertiliser,” said the data by the Ministry of Commerce and Industry. The three key segments had registered negative growth in April last year also.
Crisil Senior Director and Chief Economist DK Joshi told The Pioneer that he was not entirely surprised by the figures as they were “on expected lines as the scenario had been hinting towards it”. At the same time he cautioned that the contraction in services sector is likely to continue for some time but “there will be an improvement in the sector’s growth, it won’t be immediate”.
Commenting on the CSO data, Planning Commission Deputy Chairman Montek Singh Ahluwalia said, “There is evidence that the economy has bottomed out. But we still don’t have evidence of a strong recovery. It is challenging to get to 6 per cent (growth) as last quarter is 4.8 per cent."
According to the Finance Ministry, the growth in the current fiscal is likely to improve to 6.1-6.7 per cent. The economic growth was at 6.2 per cent for the 2011-12 fiscal. It had grown by 5.4 per cent, 5.2 per cent and 4.7 per cent in the first, second and third quarters, respectively, of 2012-13, the data showed.
Prime Minister's Economic Advisory Council Chairman C Rangarajan expected that the numbers may prompt the RBI to "act (hinting at reduction in key rates)". Industry body CII too called for easing of key rates, with its Director General Chandrajit Banerjee saying, "CII has been advocating further easing of the monetary policy with a reduction in repo rate and Cash Reserve Ratio (CRR)."
According to the CSO data, the manufacturing sector in January-March quarter of 2012-13 grew marginally by 2.6 per cent, against 0.1 per cent growth in the same period of the earlier fiscal.
Mining and quarrying sector contracted by 3.1 per cent during the fourth quarter of last fiscal, as against growth of 5.2 per cent in the same period of 2011-12. The contraction in mining sector remained unchanged at 0.6 per cent in 2012-13 over the earlier fiscal.
Farm sector output rose by a mere 1.4 per cent in the last quarter of FY13 as against 2 per cent in the same quarter of 2011-12. The agriculture sector grew by just 1.9 per cent in 2012-13 compared to 3.6 per cent in 2011-12.