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.
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:
- India's GDP grows under 5% for 2nd year running (Hintustan Times, 30 May 2014)
- El Nino may impact India's GDP by 1.75%: Assocham (PTI, The Economic Times, 08 May 2014)
- India's GDP likely to remain at sub-5% despite Narendra Modi win: Moody's (The Economic Times, 16 May 2014)
- India Inflation Rate (Trading Economics, 02 June 2014)