Economy headed for 4th straight quarter of sub-5% growth at 4.6%, say experts

The economy is headed for its fourth consecutive quarter of sub-five per cent growth with the GDP numbers for the July-September quarter of this fiscal expected to be announced on Friday.

The consensus of 40 economists obtained by Reuters showed GDP expanded 4.6 per cent year- on- year in the last quarter, better than the 4.4 per cent in the previous three months, which was the lowest since the global financial crisis.

"We expect a 4.7- per cent growth but there is no sign of a decisive recovery at this point. There is not much of an upside as interest rates are high, the government cannot spend much and private investor sentiment is weak. So, there is nothing at this juncture that can really boost growth," said Crisil chief economist D K Joshi told Mail Today.

"Growth will be higher than the 4.4 per cent in the previous quarter as the agricultural sector has done better on the back of a good monsoon and there has been some improvement in the industrial sector. But that's about it," Joshi added.

Industrial growth picked up two per cent in September up from 0.6 per cent in August driven by an uptick in exports, which grew by 11.2 per cent. But the crucial manufacturing sector continues to remain weak.

Low business confidence and high interest rates have led to a decrease in corporate investment.

Consumer expenditure has also slowed as loans are either not available or can be obtained only at very high rates of interest.

This is reflected in the slowing demand for cars as well as consumer durables.

Big-ticket infrastructure projects have been held up as a government weakened by a battery of corruption scams has not been able to push through decisions.

"With the countdown to the general elections, due in May, having already begun, the government has been virtually reduced to a lame duck, and investors seem to have gone into a wait-and-watch mode," a senior official said.

The mining sector perhaps reflects the worse example of corruption leading to a policy paralysis.

The government, caught in Coalgate , has not been able to push through decisions, and red tape has held up environmental and land acquisition approval required to expand mining capacities.

Economic growth virtually halved in two years to five per cent in the last fiscal and most economists surveyed by Reuters last month expect 2013- 14 to be worse.

In association with Mail Today