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Not just 'Relatively flat': Why Q1 GDP at 4.4% is a major slowdown

Economy Aug 30, 2013

GDP falls to 4.4% for June quarter, fiscal deficit at 63% of target

By Firstbiz Staff

India's GDP growth for April-June quarter was 4.4 percent, the government announced today.

India's fiscal deficit during the same period was Rs. 3.41 trillion, or 62.8 percent of the full-year target, government data showed on Friday.

Manufacturing too fell an annual 1.2 percent during the quarter while mining fell by 2.8 percent, the data showed. Farm output rose 2.7 percent.

Compared to the same period last year, the Q1 figure for agriculture, forestry and fishing have come down to 2.7 percent from 2.9 percent, mining and quarrying has come down to -2.8 percent from 0.4 percent; electricity, gas and water supply has come down to 3.7 percent from 6.2 percent. The Q1 figure for construction has come down to 2.8 percent from 7.0 percent; trade, hotels, transport & communication fell to 3.9 percent from 6.1 percent; financing, insurance, real estate and business services also took hit from 8.9 percent to 9.3 percent.

A dearth of investment lies at the heart of India's economic malaise. Little improvement is expected any time soon, with investors doubting whether Prime Minister Manmohan Singh's minority government can force through bold reforms with an election due within eight months.

Economic growth virtually halved in two years to 5 percent in the fiscal year that ended in March - the lowest level in a decade - and most economists surveyed by Reuters in the past week expect 2013/14 to be worse.

Reuters

Economic growth virtually halved in two years to 5 percent in the fiscal year that ended in March - the lowest level in a decade. Reuters

"The economy appears to be entering a tailspin as business confidence collapses under the weight of rapid rupee depreciation, rising energy costs, sharply tightening financial conditions and policy confusion," BNP Paribas said in a note on Wednesday.

The withdrawal of funds from emerging markets as investors re-adjust portfolios in anticipation of higher US interest rates has caused tremors from Brasilia to Jakarta.

But the weight of India's current account and fiscal deficits has seen the rupee sink faster than most currencies.

Net tax receipts for the first four months of the current fiscal year to March 2014 touched Rs. 1.45 trillion, while total expenditure was Rs. 5.21 trillion.

The country's fiscal deficit during the 2012/13 fiscal year ending March fell to 4.9 percent of the country's gross domestic product, compared with 5.8 percent a year ago.

In the annual budget presented in February, Finance Minister P. Chidambaram had set the fiscal deficit target at 4.8 percent of GDP for the current fiscal year.

With inputs from Reuters

by Firstbiz Staff

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