GDP growth estimated at 4.7% in FY14: CARE

The growth rate of 4.7% in Q3 FY14 is driven primarily by the ‘financing, insurance, real estate and business services’ sector

March 03, 2014 3:55 IST | India Infoline News Service
The GDP growth remains a concern facing policymakers this fiscal as the economy recorded a growth of 4.7% in the third quarter of FY14, which stands slightly higher than the growth of 4.4% in Q3 FY13. This has translated into a growth of 4.6% for the cumulative period April-December 2013 over the growth of 4.5% during the same period previous fiscal.
The growth rate of 4.7% in Q3 FY14 is driven primarily by the ‘financing, insurance, real estate and business services’ sector that witnessed a significant growth of 12.5% compared with 10.2% in Q3 FY13, community, social and personal services recorded a growth of 7% (4% in Q3 FY13) and agriculture, forestry and fishing sector which grew by 3.6% (0.8% in Q3 FY13).
It is no surprise that the sector of ‘agriculture, forestry and fishing’ has recorded a growth of 3.6% in the third quarter compared with the subdued growth of 0.8% in the same quarter last year given the good produce of crops in the season gone by.
Within the large group of industries ‘Electricity, gas and water supply’ witnessed a healthy growth of 5% over the growth of 2.6% in the corresponding quarter last fiscal and 5.5% in the cumulative nine months period of FY14 over 2.7% during the same time window last year.
Notable growth is also recorded in the ‘financing, insurance, real estate and business services’ sector in Q3 FY14 at 12.5% vis-à-vis the growth of 10.2% in Q3 FY14. Aggregate bank credit and bank deposits grew positively by 9.3% and 11.1% respectively. The cumulative in FY14 stands slightly lower at 10.5% than the growth in FY13 (10.8%).
The ‘manufacturing’ sector appears to be the hardest hit as growth slowed down drastically to -1.9% in Q3 FY14 from a growth of 2.5% in the corresponding quarter of the previous fiscal. This was largely expected given the consecutive negative growth recorded in the Index of Industrial Production in November and December 2013.
Sector of ‘mining and quarrying’ has improved marginally even though the growth rate still remains in negative (-2% in Q3 FY13 to -1.6% in Q3 FY14).
‘Construction’ industry slowed down from 1% to 0.6% and ‘trade, hotels, transport and communication’ also witnessed a reduction in growth from 5.9% to 4.3% in Q3 FY14.
The overall composition does not appear to have changed significantly.
Private final consumption has remained more or less status quo at 58.2% in Q3 FY14.
Government’s consumption expenditure also remained almost flat at 12.75 of GDP in Q3 FY14 vis-à-vis 12.65 in the corresponding quarter previous fiscal.
Gross fixed capital formation as a proportion of GDP reduced to 27% in the third quarter this fiscal compared with 29.2% in the same quarter last fiscal.
Expenditure on valuables fell significantly from 2.6% in Q3 FY13 to 1.9% in Q3 FY14. This is a result of the curb on gold imports put forward by RBI earlier this year.
The economy does not appear to be on the desired growth path as the GDP growth has been 4.4% in Q1, 4.8% in Q2 and 4.7% in Q3 FY14. The Finance Minister in his interim budget reaffirmed that the estimated growth for FY14 is 4.9%. However, this target now appears a challenge since growth rate would have to be 5.5% in the last quarter of this fiscal for the country to meet the target. CARE’s estimation suggests that the GDP growth for FY14 will stand at 4.7% assuming 5% growth in Q4. There would be a downward bias in case this does not materialize.

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