Expert Zone

Straight from the Specialists

Slow pick-up in India’s GDP growth

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

GDP estimates by the Central Statistics Office for the 2013-14 fiscal year show an improvement over the previous year. But the extent of improvement is too small for comfort. Possibly, in the final revision, that small margin may disappear or even turn negative.

This year, India’s GDP is expected to be up 4.9 percent from 4.5 percent the previous year. This additional growth has come mainly from agriculture, due to a favourable monsoon. Agricultural growth was three times the previous year. Production of non-food grains (like vegetables and fruits), and animal products (like meat and eggs), did not increase adequately in spite of the inflated demand and will continue to be the main source of inflation.

It cannot be said for certain that the monsoon will be normal in 2014 and, even if it is, growth will be lower because of a higher base this year. We cannot rely on agriculture for GDP growth. It has to come from industry and services.

Both performed badly this fiscal year and there are no indications of significant change in the coming year unless major reforms come through. The Congress-led government failed in this respect. Even the opening up of retail to foreign investment did not come through because the reform was hedged with too many conditions, which foreign investors were unwilling to comply with.

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