The admission is here, finally! The Central Statistical Organisation, the government’s number cruncher, on Tuesday said India’s GDP will grow by just 6.9%, the slowest pace since the global financial crisis hit local shores in early 2009.
What’s worse is analysts saying the next fiscal will be no different. This means prospects for jobs and higher salary will remain stifled over the next 12-14 months.
“For the next fiscal, we see limited drivers to growth — private consumption is likely to stay steady, while investment demand could take a bit of time to pick up,” said Indranil Pan, chief economist, Kotak Mahindra Bank.
The fiscal space also does not afford a chance to pump-prime the economy, he said — meaning the government does not have the money to spend and generate demand — while the external atmosphere is likely to stay harsh.
Chetan Ahya and Ridham Desai of Morgan Stanley, as part of an Asia Strategy Report, on Tuesday said they expect the depth of the growth slowdown to be at least as bad as in 2008-09, if not more.
“We see the long duration of the current slowdown as a bigger challenge. This time around, there is limited leeway for aggressive monetary policy action, no room for counter-cyclical fiscal expansion, while weak global capital markets imply that a V-shaped recovery is unlikely,” they said in the report.
“A weaker growth trend lasting for more than 3-4 quarters would make the cycle more harmful with a major rise in non-performing assets leading to risk aversion in the domestic banking sector,” Ahya and Desai said.
They expect GDP growth to be around 6.9%-7% in 2012-13.
“This means salaries will be moderate and in a few sectors, employees will be ready to hop jobs with a cut in pay,” said Kris Lakshmikanth, CEO and managing director, HeadHunters India, an executive search firm.
Economists say the government needs to return to the 7.5%-8% growth track ASAP.
“Otherwise, the long-term growth potential of the country could be impacted. This will be possible only if investment growth is back on track, which would require addressing the power sector issues and some amount of monetary policy easing by the RBI,” said Samiran Chakraborty, head of research, India, Standard Chartered Bank.
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