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GDP is estimated at 6.1% during the first quarter of the current fiscal compared to 7.8 per cent growth recorded during the corresponding period of the last fiscal. Electricity and financing sectors posted higher growth of 6.2 and 8.1 per cent, respectively, in the first quarter of this fiscal, against 2.7 and 6.9 per cent a year ago. Construction and community services also managed good growth of 7.1 and 6.8 per cent against 8.4 and 8.2 per cent, respectively.
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Agriculture and manufacturing grew at a slower rate of 2.4 and 3.4 per cent against 3% and 5.5%, respectively which is a cause for concern. Foodgrain out put may dip by 20 mt, a decline of 12%. It is estimated that the poor monsoon with 25% deficit in rain fall may result in Agri GDP growth becoming negative to -2% this fiscal. With over 60% of the population dependant on the rural sector, a slowdown here has ramifications, not only in terms of rural demand but, more important, human distress. Especially when juxtaposed with the rise in price of food articles (8.5%).
In the case of services, the overall growth rate of 7.7 per cent for April-June works out lower than the corresponding previous two quarters’ numbers of 8.4 per cent and 9.5 per cent, respectively. Growth in services like hotels, trade, transport and communication was significantly lower at 8.1 per cent against 13 per cent. |
GDP growth driven by increase in Govt Expenditure : |
Even this moderate 6.1% growth in GDP is achieved by hike in the Govt expenditure the share of which increased to 9.9% at constant prices compared to 9.6% during the corresponding period last year, accounting for 16% in the incremental growth in GDP compared to NIL share in incremental growth during comparable period during the previous year. At the same time private consumption expenditure declined by 2.4 percentage points from 58% to 55.6% accounting for only 16% share in incremental growth of GDP compared to 33% share in the comparable period during the previous year. Government spending has had its effect to date but the benefits will peter out before long. The RBI states that an expansionary fiscal deficit with an accommodative monetary policy may lead to inflation expectations. These are unhealthy trends which need to be reversed.
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Decline in Capital formation, Exports and Imports : |
Gross fixed capital formation declined by one percentage point to 31.6% from 32.6% during the same comparable periods at constant prices.
Exports too declined to 22.3% from 26.5% during the same comparable periods. Exports dropped 28.4 per cent in July, the tenth straight month to record a fall. Imports also declined in tandem to 20.6% from 27.8%. Imports fell by 37.1 per cent in July. The imports declined mainly due to the price effect...oil prices are about 50 per cent cheaper than last year. |
Drought may restrict growth rate to 5.5%: Plan panel :
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| Agricultural growth closely follows monsoon. Monsoon deviations have a major impact on agricultural output.. There is a direct relationship between agricultural GDP growth and the deviation of rainfall from normal. A severe drought has the potential to restrict the country's economic growth to 5.5 per cent, the Planning Commission has said. "In the worst case scenario of farm sector GDP declining by 6.0 per cent, overall GDP could be limited to 5.5 per cent." The Planning Commission said growth in the second and third quarter may not be as good as the first quarter. |
“I am glad that the worst may be over”: Said Planning Commission Deputy Chairman Montek Singh Ahluwalia “and we expect to see improved performance in the subsequent quarters. The (GDP) numbers are very good, it is consistent with what we are hoping for,” told reporters after the GDP data were released. Asked about the Planning Commission's note on inflation and whether it will rise above the comfort zone of 4-5 per cent by the end of this fiscal, Ahluwalia said, "If drought is managed well and there is good Rabi crop as well as fiscal consolidation, inflation may well be contained within the comfort zone.
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| Comments : |
‘The euphoria of July also saw Montek Singh Ahluwalia declare that the “worst is behind us.” (Though it must be conceded that he said that even in June and, possibly, earlier.) That’s good. I only wish he had told us when the worst was upon us. It would have been nice to know. Otherwise, it gets hard to appreciate improvement. A huge fall in farm incomes is in the offing. If the government wants to act on a war footing, it could start with a serious expansion of the NREGS (about the only lifejacket people in districts like Anantapur in Andhra Pradesh have at this point, for instance)’.P.Sainath |
Agriculture’s contribution to GDP is only around 18%- Chawla -F.S :
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Finance Secretary Ashok Chawla while conceding that the poor rainfall would affect agricultural output, he allayed concern that it would impact growth, as agriculture’s contribution to GDP is only around 18%. Chawla said the manufacturing and service sectors would take up any slack.
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COMMENTS : There are reports in financial newspapers that the ongoing drought affecting nearly 200 districts in the country may not have much effect on GDP, since the farmers in the drought-affected areas contribute hardly 3 per cent to GDP. It is sad that such a measure of the impact of drought on the lives and livelihoods of millions of rural families is even considered. It is this mindset that is responsible for our country being the home of the largest number of poor and malnourished people in the world. P. Sainath’s article in The Hindu.Agriculture is not just a food producing machine but the backbone of the livelihood of 60 per cent of Indians. The extensive drought spotlights a situation of mass rural deprivation and a mindset that is insensitive to it. “In a country where 60 per cent of people depend on agriculture for their livelihood, it is better to become an agricultural force based on food security rather than a nuclear force.” Prof.M.S Swaminathan |
Note: Even though agriculture share in GDP is18 per cent and policymakers are dismissive of its impact on GDP prospects due weightage should be given to the fact that two-thirds of India’s population is dependent on its fortunes and they have never fared well precisely because of official neglect over the years. With 65% of the population dependant on the rural sector, a slowdown here has ramifications, not only in terms of rural demand but, more important, human distress. Especially when juxtaposed with the rise in price of food articles (8.5%).
The key to long-term sustained growth must lie in a revival in agriculture and manufacturing. While the first depends on reforms to rain-proof Indian agriculture, the second is linked to revival of the global economy. |
