India is not an exception in the world as ongoing global meltdown has hit its growth rate severely. The gross domestic product (GDP) rate for the third quarter (October-December 2008) fell to 5.3%, the lowest in the six years on the back of declining growth of manufacturing sector and shrinking agriculture.
Releasing the government GDP data, the Central Statistical Organisation (CSO) painted a gloomy picture of India’s dwindling growth rate despite all the efforts and claims of the government to achieve the projected growth rate of 7.1% in this fiscal.
After continuous rising over 8.5% in last four years, India’s growth rate suddenly began to slump due to global turmoil, higher rate of inflation and shrinking demand. Last year for the same quarter, India had achieved the growth rate of 8.9%, which slipped to 7.9% and 7.6% in the first two quarters of this fiscal year.
Now the unexpected fall of 2.3% as against the previous quarter has produced a tough challenge before the government to achieve the projected target, market experts believe.
To meet the target, India would have to achieve the milestone of 7.7% growth rate in the fourth quarter amid worsening economical crisis environment that seems to be too optimistic, as experts assume.
On the contrary, some economists are not agree over the released data as they suspect that the released data are based on sparse data as agricultural sector has seen more growth in this year, which complete results are yet to come. Moreover, the estimation of a 2.2% drop in forestry and fishing is also not based on complete statistics.
In terms of growth in investments, the third quarter also showed better results as investment in fixed capital assets like plant and machinery continued to be robust despite economic slowdown. The Gross fixed capital formation stood at 31% as against last year’s 30.8% for the same period. Similarly, inventories rose to 4.3% of GDP from 3.4% of GDP in the third quarter of 2007-08.
The ball is now in the court of Reserve Bank of India (RBI) that can make another round of cut viewing the cooling inflation so that the market demands can boost and the rate of growth can increase.
According to latest wholesale price index data, the rate of inflation has come down to below 4%, a comfortable zone of management. In this environment, RBI can take considerable steps to meet the target of estimated growth rate.
Various sectors, including manufacturing sector, have witnessed the moderate growth rate in this quarter. The manufacturing sector contracted by 0.2%; electricity, gas and water supply shrank by 0.5%; while construction sector by 2.3% as against the previous corresponding quarter. Likewise, the growth of trade, hotels, transport and communication slid from 11.6% to 6.8% while financing and insurance sector dipped from 11.9% to 9.5%.
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