India grew at a
tepid 4.8 per cent in the July to September quarter of fiscal 2014, better than the 4.4 per cent in the first quarter of the year, in line with most estimates, but here's what's worrying about the below five per cent growth-agriculture, on the back of a low-base effect, rose 4.6 per cent while inflation continues unabated in near double-digits.
Services, considered the core strength of the
Indian economy , grew at 5.9 per cent, down from 6.6 per cent last quarter, mining too slipped 0.4 per cent. The services sector contributes more than 50 per cent to India's GDP and India has long banked on its services exports to curb its current account deficit.
Mining continues to be marred by what seems like a constant policy flux even as India imports coal to meet its electricity generation requirements, while millions of tonne of coal is lying in the ports around the country.
There is a strong expectation that the second half of fiscal 2014 would be better than the first and that we might have hit the bottom where bad news is concerned. There are constant reiterations by the finance ministry that India will meet its fiscal deficit and current account deficit target on the back of a robust agriculture growth and expenditure cuts.
But what's looming like a dark cloud on all the positive iterations is inflation-India has been fighting a losing battle with inflation for almost three years and it has become increasingly evident that monetary policy alone cannot fight inflation.
"While the situation could further improve in the second half of the year, some of the existing stress points need to be dealt with effectively. Appropriate targeting to check persistently high food inflation is of utmost importance", said Naina Lal Kidwai, President, FICCI - one of the two largest industry associations in the country.
GDP estimates for the second quarter also show that growth in core sectors seems to be slipping and with little time left before elections-in all probability the only fillip to the economy would be through election spending and a good agriculture output-and that's only a fraction of what India needs to inspire confidence and investments.
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