The first quarter GDP number for 2012-13, at 5.5 percent is less of a shocker because some of the estimates made by brokerage houses were worse. This marks a small turnaround, since GDP has been falling for five straight quarters before this.
The 5.5 percent registered in April-June 2012 (down from 8 percent in April-June last year) thus marks a small improvement over the fourth quarter GDP number of 2011-12 of 5.3 percent.
But the good news stops here. These numbers confirm the anecdotal stories of a slowdown in many sectors.
The helicopter view is this: agriculture has slowed (growth down from 3.7 percent in Q1 of last year to 2.9 percent this year), mining is stagnant (-0.2 percent to 0.1 percent), manufacturing has crashed (7.3 percent to 0.2 percent), electricity, gas and water supply has fallen (8 percent to 6.3 percent), and trade, hotels and transport too have crumbled (13.8 percent to 4 percent).
On the plus side, the growing sectors are construction (up from 3.5 percent to 10.9 percent), financing and insurance (9.4 percent to 10.8 percent), and community, social and personal services (up from 3.2 percent to 7.9 percent).
But don't be too encouraged by the last number, for community and personal services include government spending - most of which is money down the drain.
Additional confirmation of government overspending comes from trends in private final consumption expenditure (the money you and I spend from income or borrowed money). This number is stagnant as a share of GDP at 59.5 percent; but government spending is moving up (from 10.6 percent last year to 11.1 percent of GDP) in real terms (i.e. after inflation). In current money terms, government spending is growing even faster - up from 11 percent last year to 11.7 percent this year.
Investment (gross fixed capital formation) is down from 33.9 percent to 32.8 percent. As government spends more by borrowing heavily from all of us, the corporate sector is investing less in creating future capacity.
Put another way, this is what the data indicate: people and companies are holding back on spending or investing more; the government is still living well beyond its means. This is a recipe for continuing slowdown unless the climate for private spending and investment is improved.
Gazing at our crystal-ball, this is what the future holds for the India growth story.
After achieving only 5.5 percent growth in Q1, the chances of the whole year topping 6 percent are poor, unless there is a miracle in agriculture from late rains, and a spike in manufacturing and services growth in the second half of the year.
With inflation likely to remain elevated, the RBI cannot easily cut rates, not when the government continues to spend merrily.
Any attempt at reform, like raising diesel prices, will add to inflation in the short-term, with negative consequences for growth. But not raising rates will keep rates higher for longer, since it means government will borrow more to spend on subsidies.
Politically, 2012-13 will be a tough year, with many policy changes being forced on the government by courts - higher spectrum prices, and competitive bidding for coal blocks. This will again slow down growth.
On the positive side, higher earnings from disinvestment (the Rs 30,000 crore target could be exceeded this year), and spectrum auctions, could ease the pressure on the Union budget, but the gains will not be substantial enough to make up for the higher losses on the subsidies side - especially oil.
A lot would depend on how global commodity prices behave. If they fall, India will benefit. But if they don't, we are up the creek without a paddle.
The window of opportunity for reforms is rapidly closing. Political developments already indicate that all parties are in election mode. So one should not expect any major boosters from this side.
The next budget is less than six months away - and it could be the last one before the next election. It is likely to be stimulus oriented, since one can expect election giveaways. The UPA will use the drought-like situation to spend more on agriculture and freebies. This could pump up the economy at a time when inflation will still be high.
Whoever wins the next election will inherit a damaged economy in dire need of reforms and expenditure controls. A poisoned chalice, so to speak.
More From R Jagannathan.