- POSTED: 28 Feb 2014 23:02
India's economy grew by a sluggish 4.7 per cent in the last quarter of 2013, data showed on Friday, marking more bad news for the ruling Congress party ahead of looming elections.
NEW DELHI: India's economy grew by a sluggish 4.7 per cent in the last quarter of 2013, data showed on Friday, marking more bad news for the ruling Congress party ahead of looming elections.
The 4.7 per cent year-on-year expansion in the three months to December undershot market forecasts of around five per cent growth and reflected high interest rates that have crimped investment and consumer spending.
No immediate improvement was seen on the horizon for growth in the gross domestic product (GDP) of Asia's third-largest economy.
"We continue to expect India's economic recovery to remain slow and uneven. Local conditions remain challenging, which is critical as the economy is driven primarily by domestic demand," said Capital Economics economist Miguel Chanco.
The figures reported by India's ministry of statistics was the fifth straight quarter of below five-per-cent expansion.
Growth has crumbled from nearly double-digit expansion just two years ago, a level economists say India must reach again to generate jobs for its vast young population.
Although down from November, stubbornly high consumer price inflation continues to constrain household spending power, economists said.
What's more, economists say, a huge backlog of projects stalled by India's infamous bureaucratic red tape will keep weighing on investment.
Meanwhile, recent tightening of both monetary and fiscal policy to curb inflation is placing added downward pressure on the economy.
Overall, economic growth "is likely to remain muted", said Chanco.
The third-quarter performance was slightly weaker than the previous three months when the economy grew by 4.8 per cent.
Earlier this month, the government forecast the economy would grow by 4.9 per cent in this fiscal year to March, after expanding by a decade low of 4.5 per cent last year.
However, most private economists see expansion in the low four per cent range.
"There is no sign of a lift in the real economy," senior Moody's Analytics economist Doug Levine said.
Economists say the economy grew 4.6 per cent in the first half and needs to expand 5.2 per cent in the second half to meet the government's full-year 4.9 per cent growth target.
The breakdown of third-quarter growth figures showed stronger services output more than offset by slowdowns in the agricultural and industrial sectors.
On the spending side, there was more domestic demand weakness. Both consumption and investment growth faltered after a slight pickup in the previous quarter.
Exports slowed too, but still grew at a double-digit rate relative to a year earlier.
The figures were a blow for the scandal-tarred Congress party-led government, which has been desperate to breathe new life into the economy before the elections due by May.
Hindu nationalist opposition prime ministerial candidate Narendra Modi has painted himself as the lone leader who can steer India's growth back into the fast lane.
Modi, seen as a divisive politician due to deadly anti-Muslim riots that took place on his watch as chief minister of Gujarat state 12 years ago, asserts he can duplicate the economic success story in his home province.
But Levine, in a report entitled "India Underwhelms", said while Modi may offer a chance for better governance in the graft-tainted nation, "it will be a long road for the economy".
On a more positive side, India's gaping current account deficit -- the broadest trade measure -- that had alarmed analysts is seen narrowing to 2.4 per cent of GPD from a peak of 4.8 per cent last year.