 "Q3 GDP at 4.7%; economy heads towards worst year in decade")
All signs pointed towards a lower GDP print, yet the finance minister bravely hinted that the remaining two quarters of the current fiscal could post a growth of 5.2%. Well he is wrong.
Numbers released by the government says that the country grew by only 4.7% in the third quarter lower than estimates of even pessimist economists who were expecting a growth of 4.9%.
Government started the year with an assumption of nearly 6.1% growth (budget estimates) but have subsequently reduced it blaming everyone else but its own policy paralysis.
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Even a few days back in his pre-budget speech finance minister could not get the numbers right. He estimated the growth in economy to be around 4.9%, which given the 4.6% growth in the first half meant that the economy would have to grow at 5.2% in the second half. With a 4.7% in the third quarter the economy will have to grow by 5.7% in order to prove the finance minister right.
Earlier in the month IIP numbers were announced which posted a contraction of negative 0.6% for December 2013. With this the entire third quarter was a wash out with all three months in the quarter posting contractions. Worst there is little sign that there might be any improvement in the fourth quarter.
However, another set of data released by the government shows that maintaining the current growth rate would be difficult. India’s fiscal deficit in the first ten months of the 2013/14 financial year crossed the target for the whole year.
Finance minister had in his speech brought down the deficit target to 4.6% of GDP from 4.8% expected earlier. However, with the target (in absolute terms) already crossing the budgeted mark, it is unlikely that the government will be increasing its spending in the coming months.
Along with the expenditure it is likely that the finance minister will reduce his growth target one last time before the fiscal ends registering the decades slowest growth rate.