India: Growth Fails to Reach 5% Second Year in a Row

June 2nd, 2014
in econ_news, syndication

Econintersect:   India reported GDP growth of 4.7% for the fiscal year ending 31 March 2014, the second consecutive year below 5%.  The previous fiscal year had growth of 4.5% so the new number is a slight improvement.  But it falls short of the government's forecast as recently as February of 4.9%.  This is the first time in 26 years that the economy has grown less than 5% two years running.  The weakest sector in the 2013-2014 year was manufacturing which contracted by 0.7%.   This followed a number of years of manufacturing growth.

India-gdp-growth-2004-2014-380x200

Follow up:

The incoming Modi government is faced with the challenge of taming an inflation rate that stays stubbornly above 8% (between 8% and 11% over the past 12 months), while pushing growth.  There are few optimistic outlooks for the 2014-2015 fiscal year now underway.  Moody's has already forecast another sub-5% year in spite of the Modi landslide victory.

An additional challenge for the current year comes from forecasts of a possibly deficient monsoon which provides the three pronged difficulties of reduced agricultural production, higher prices and increased nutritional challenges for poor and lower income Indians:  Lower GDP, higher inflation and increased hunger.  One report has estimated that only 5% deficiency in rain could lop 1.75% of GDP for the year.

From the Hindustan Times:

http://www.hindustantimes.com/Images/popup/2014/5/3105pg1a.jpg

Sources:
















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