31/5/2014 Narendra Modi government faces challenge as GDP grows 4.

7% in FY 14 - The Economic Times

http://economictimes.indiatimes.com/news/economy/indicators/narendra-modi-government-faces-challenge-as-gdp-grows-4-7-in-fy-14/articleshow/3579898 1/2
You are here: ET Home News Economy Indicators
By ET Bureau | 31 May, 2014, 10.55AM IST Post a Comment
Indias growth barely accelerated in the year ended March,
remaining stubbornly below 5%, but disappointment was
balanced by hope.
Editor's Pick
New MSCI order puts stocks into overdrive
India Inc hails Narendra Modi's 10-point
agenda
Govt to push funds to projects of Rs 500 cr-
plus
Love in Tokyo: Rajan says RBI, FinMin one
on inflation
India's economy looks to Modi for growth
rebound
ET SPECIAL: Save precious time tracking your
investments
Narendra Modi government faces challenge as GDP grows
4.7% in FY 14
NEW DELHI: India's growth barely accelerated in the year ended March, remaining stubbornly
below 5%, but disappointment was balanced by hope that the new Narendra Modi government
will move rapidly to revive demand and investment and put the economy back on track, much in
the manner of the skies clearing swiftly after the brief but violent storm that ripped through the
national capital on Friday.
India's gross domestic product grew 4.7% in FY14, a notch higher than 4.5% in the year before,
on account of the poor performance of manufacturing, mining and construction, an indication of
weak investment activity. The last quarter of FY14 registered 4.6% growth, the same as in the
third quarter, according to data released by the Central Statistics Office on Friday.
GDP for the year came in below CSO's advanced estimate of 4.9%. This is the third annual
sub-5% growth in the last 11 years. In a separate announcement, the government said the FY14
fiscal deficit narrowed to 4.5% of GDP from 4.8% initially estimated in the budget and the
revised 4.6% figure in February. Economic revival is among Prime Minister Modi's highest
priorities and the government intends a greater focus on reforms toward this end.
These include liberalising foreign direct investment norms in various sectors such as defence,
ecommerce and railways, a strong emphasis on infrastructure projects, changes in the land
acquisition law to make the process easier, the passing of universal tax laws such as GST and
single-window clearances for doing business.
Against this, Finance Minister Arun Jaitley, entrusted with the job of reviving the economy by
Modi, has to contend with a possibly weak monsoon and the central bank maintaining its focus
on fighting inflation.The Reserve Bank of India will make its next monetary policy announcement
on June 3. The manufacturing sector contracted by 0.7% in FY14, and is negative for the first
time since 1991-92 when it shrank 2.4%, the year reforms were kicked off by former Prime
Minister Manmohan Singh, who was finance minister at the time.
Former Finance Minister P Chidambaram expressed regret that growth didn't pick up to 5% in the
year but suggested that this could yet happen. "The growth rate for Q1 has been revised upward
from 4.4% to 4.7% and for Q2 from 4.8% to 5.2%. It is therefore possible that the growth rate for the
full year may undergo an upward revision. Nevertheless, I am disappointed that we could not achieve
a growth rate of 5%," he said in an emailed statement.
"The clear winner is agriculture and vindicates the policy measures taken by the UPA II government.
Other performers are electricity and finance, insurance, real estate and business services. The weak
links are mining and manufacturing. Many bottlenecks in these two sectors were cleared and I hope
that the benefits can be reaped in 2014-15." Manufacturing contracted in three of the four quarters in
the previous fiscal.
Mining activity declined by 1.4%. Sectors such as agriculture, banking and electricity bucked growth
estimates for FY14. Agriculture and allied activities grew 4.7% against 1.4% the year before. Economists are, however, optimistic about
growth in FY16 with estimates going up to 7% while the average for the current fiscal stands at 5.5%.
Gross fixed capital formation, a proxy for investment, declined by 0.1% during the year against 0.7% growth registered a year before.
Investment activity generally slumps in election year, with most companies deferring expenditure until new government is formed.

31/5/2014 Narendra Modi government faces challenge as GDP grows 4.7% in FY 14 - The Economic Times
http://economictimes.indiatimes.com/news/economy/indicators/narendra-modi-government-faces-challenge-as-gdp-grows-4-7-in-fy-14/articleshow/3579898 2/2
Other Times Group news sites
Times of India |
| Mumbai Mirror
Times Now | Indiatimes
|
| Lif ehacker
Gizmodo | Eisamay | IGN India
NavGujarat Samay
Living and entertainment
Timescity | iDiva | Bollywood
Zoom | Healthmeup | Luxpresso
Technology | Guylif e | Online
Songs | Travel Guides | Hotel
Reviews | Go Cricket
Networking
itimes | Dating & Chat | Email
MensXP.com
Hot on the Web
Sunny Leone Photogallery | 2014
Elections
New Projects in
Bangalore | Anushka Sharma
Photos
Hindi Movies Online | Free Hindi
Movies
Services
Book print ads | Online shopping | Free SMS | Website
design | CRM | Tenders
Matrimonial | Ringtones | Astrology | Jobs | Property | Buy car | Bikes in
India
Used Cars | Online Deals | Restaurants in Delhi | Movie Show Timings in
Mumbai
Remit to India | Buy Mobiles | Listen Songs
About us / Advertise with us / Terms of Use and Grievance Redressal Policy / Privacy Policy / Feedback / Sitemap / Code of Ethics Copyright 2014 Times Internet Limited. All rights reserved.
Home | News | Markets | Personal Finance | Mutual Funds | Inf otech | Jobs | Opinion | Features | Videos | My Portf olio
Live Market News Portf olio Mobile Live TV Newsletter Commodities Speed QnA Blogs Alerts
A stable government at the Centre - Modi has a strong majority - may now lead to a revival of the investment cycle which will spur economic
activity. "The de-clogging of the project pipeline would help revive demand in the economy. Moreover, the ushering in of a stable government,
post elections, has revived sentiment and lifted investor confidence, which would pave the way for growth. But much more is required to turn
around the economy," said Chandrajit Banerjee, director general, CII.
Private final consumption expenditure, a proxy for demand grew by 4.8% during the fiscal, and a robust 8.4% in Q4. "The most puzzling part of
today's data was the sharp jump reported in the private consumption expenditure growth during last quarter despite no perceptible signs of
recovery in consumption demand," said Shubhada Rao, chief economist, YES Bank.
Production of consumer durables, an indicator of demand, had fallen 12.2% in FY14, as per the index of industrial production. The services
sector, on the other hand, got a boost from the banking segment, which grew a robust 12.9%, faster than 10.9% in the previous fiscal. Per
capita income grew slightly more than the previous year, by 2.7% in real terms, against 2.1% in FY13.
Without adjusting for inflation, annual income per head stood at Rs 74,380. Growth in the first half saw a significant upward revision to 5% from
4.6% estimated earlier, putting second-half growth lower, contradicting the perception of a pickup in economic activity in latter part of the year.
The second quarter saw GDP growth revised to 5.2% against 4.8% estimated earlier. Though a stable government may be successful in
pushing through difficult reforms, it will still have to keep an eye on factors such as a below-normal monsoon with El Nino brewing in the South
Pacific. The revival of investor confidence and a pickup in infrastructure projects are seen as the immediate actions that could help revive
growth.
Rao of YES Bank, said, "We continue to expect that the economy bottomed out in FY14, with GDP growth likely to improve towards 5.4% in
FY15. The strong election outcome has engendered expectations regarding reforms by the new government." Agriculture clocked an 11-
quarter high growth of 6.3% growth in Q4 of 2013-14. "Growth has been supported by the farm sector and the good harvests in both the
seasons...The question is whether we can sustain this high growth in FY15 on this base and the possibility of El Nino," said Madan Sabnavis,
chief economist, CARE Ratings.
Private consumption expenditure growth rose a robust 8.2% in Q4 compared with an average of 3.7% during first three quarters of the fiscal.
"The most puzzling part of today's data was the sharp jump reported in the private consumption expenditure growth during last quarter despite
no perceptible signs of recovery in consumption demand," said Rao of Yes Bank.
Production of consumer durables, an indicator of demand, had fallen 12.2% in FY14, as per the index of industrial production.