Expectations that the dismal economic run will end before long appear to be gaining ground even as the gross domestic product (GDP) growth came in below 6% — below most expectations, in fact — for the third quarter on the trot.
At 5.3%, the GDP growth during July-September was lower than the 5.5% logged the previous quarter and 6.7% in the corresponding period a year ago.
“We are getting close to the bottom, although we are most likely talking about a ‘bathtub shaped’ recovery with some bottom-scraping in coming quarters,” said economists Leif Eskesen and Prithviraj Srinivas of HSBC. The duo predicted a 6.9% growth for the next fiscal.
Taimur Baig and Kaushik Das, economists at Deutsche Bank, appeared to concur. “Looking forward, we see some modest recovery in growth momentum from early next year, helped by expectations of a rate cut, business-friendly measures by the government and rise in external demand,” they noted, forecasting a 6.5% growth next fiscal.
The third successive quarter of sub-6% growth marks a trend that was last seen during the post-crisis period of 2008.
The finance ministry said in a statement that overall the growth rate was below expectations. Finance minister P Chidambaram had projected a 5.5% growth for the quarter.
The services sector grew the most at 7.2%, followed by industry at 2.8% and agriculture and allied sectors at 1.2%. Industrial growth was mainly affected due to lower growth in manufacturing sector, while agriculture was impacted by lower rainfall during the June-July period.
CRISIL Ratings, the Indian unit of Standard & Poor’s said manufacturing, which grew just 0.8%, was impacted by policy hurdles, slowing consumption and investment demand.
Also, the real private consumption growth slowed to 3.7%, which is the lowest in the last 30 quarters, said HDFC Securities.
Imports continued to grow faster than exports. Imports grew 6.6% while exports were up 4.3%.
HSBC said the net exports acted as a major drag on growth.
Economists are now convinced that this fiscal will end with a 5.5% growth, given the global environment and domestic policy logjam.
“There is a risk that the structural reform momentum could fizzle out, which the difficult start to the parliamentary winter session has clearly highlighted,” said Eskesen and Srinivas of HSBC, projecting a 5.7% growth for the current financial year.