Though marginally higher than that in 2012-13, gross domestic product (GDP) growth in 2013-14 came in below even the 4.9% projected in the advance estimate of 4.9% made in February. Once you take into account the much higher agriculture growth in FY14 — 4.7% versus 1.4% in FY13 — this means ex-agriculture GDP growth in FY14 was much lower than that in FY13.
A likely El Nino-induced drought will result in contracting agricultural growth, making even a 5.5% GDP growth in FY15 an uphill task.
This worsening trend can be seen in manufacturing where FY14 growth contracted 0.7% compared with even FY13’s moderate 1.1% growth — the FY13 growth, in turn, was dramatically lower than FY12’s 7.4% growth.
Even trade, hotels, transport and communications, which is the largest segment of services and accounts for more than a fourth of GDP, grew at just 3% in FY14 versus 5.1% in FY13. Only financing/real estate and community services — the latter is essentially government services — grew at a faster pace in FY14.
The worst part of the GDP data, however, is what has happened to gross fixed capital formation. It grew the slowest in seven quarters and, at 28.3% of GDP, is a full 4 percentage points lower than it was in FY08, the year in which India recorded the lowest rates of investment. Assuming a static incremental capital output ratio — India’s has worsened to the worst in two decades — this means India’s optimum growth levels have reduced by 1 percentage point.