Farm growth props up GDP, but services flop

Nov 30 2013, 15:55 IST
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SummaryWith 84% of deficit hit by Oct, lower govt spend to weigh on growth

WPI may range around 10% and 7% respectively," said Shubhada Rao, chief economist at Yes Bank.

Industry bodies, however, were less optimistic of a strong recovery and pressed for a rate cut to boost expansion. "The two drivers of growth this year · a good monsoon and exports · are insufficient to pull the economy out of the present slowdown, as mining, manufacturing and service sector output remains subdued. The problems accruing from low investment and consumption demand together with high food inflation are holding back the economy," said Chandrajit Banerjee, director-general of CII.

“No doubt the improved performance in agriculture, electricity, construction and exports as well as the modest recovery in manufacturing are positives which could augur well for the economy for the current fiscal, but the need is for an even better growth in these sectors. The data for October and November 2013 could reflect a pick-up in demand owing to the festive season and this could be reflected in the third-quarter GDP figures but at the current pace of growth, a firm rebound may not be expected before the end of the fiscal, when the impact of the monsoon would be felt on rural demand and the impact of project clearance by CCI might become visible," Banerjee added.

The farm sector contributed in a big way to economic growth in the September quarter and expanded 4.6%, compared with 1.7% a year before and 2.7% in the previous quarter. Construction grew 4.3% from 3.1% a year ago and 2.8% in the June quarter. Similarly, power sector growth jumped to 7.7% from 3.2% a year earlier and 3.7% in the first quarter of this fiscal.

The mining sector, which reported a 2.8% decline in output in the first quarter of 2013-14, contracted by 0.4% in the second quarter as well. With the utilities sectors also faring badly, key inputs remained expensive and in short supply. Manufacturing, however, has picked up a bit since the June quarter and registered a 1% expansion in the last quarter compared with 0.1% expansion a year before. Trade, hotels, transport and communications sector grew slightly to 4% from 3.9% in the June quarter while financial services growth rose to 10% last quarter from 8.9% in the April-June period. However, community, social and personal services growth rate dropped to 4.2% from 9.4% in the previous quarter.

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