The worst fears of India Inc appear to have come true with the country's growth retarding to 4.4 percent for the first quarter of this fiscal -- the lowest in four years -- with a 1.2 percent contraction in factory output, government data showed Friday.
This is the worst quarterly growth in India's gross domestic product (GDP) since January-March quarter of 2009, the year of the global financial crisis.
The manufacturing sector contracted 1.2 percent and mining output dropped 2.8 percent in the quarter ended June 30.
The growth of agriculture sector fell to 2.7 percent, while the services sector registered a healthy 9.4 percent growth in April-June quarter of the current financial year, according to data released by the Central Statistics Office (CSO) here.
Quarterly GDP at factor cost at constant (2004-2005) prices for the first quarter of 2013-14 was estimated at Rs.13.71 lakh crore, as against Rs.13.14 lakh crore in the corresponding quarter of the previous year, showing a growth rate of 4.4 percent year-on-year, the CSO said.
The economy had expanded by 4.8 percent in the previous quarter and 5.4 percent during the corresponding quarter of last year.
Chairman of Prime Minister's economic advisory council C. Rangarajan said the quarterly numbers were on the expected line.
"The second quarter too might follow the same trajectory. I expect the third and fourth quarter to be better than the first half," Rangarajan said adding agriculture and manufacturing were likely to show better performance from the third quarter of the current fiscal.
"Everyone has assessed the fiscal growth to be between 4-5 percent, we have to wait and see the third and fourth quarter results for this," he said.
Earlier speaking in parliament, Prime Minister Manmohan Singh expressed hope that the economy would grow at 5.5 percent for the whole financial year.
"I sincerely hope that the growth rate will be 5.5 percent in the current financial year," the prime minister said in the Rajya Sabha, the upper house of parliament.
"The economy continues to tread in difficult waters as many challenges remain on the fore," said Naina Lal Kidwai, president of the Federation of Indian Chambers of Commerce and Industry (FICCI).
"The precariousness displayed by rupee has raised concerns afresh on the external front, industrial growth continues to face deceleration, and the investment cycle is yet to kick off," Kidwai said.
"The GDP figures for first quarter clearly show that the economy continues to be in the throes of a slowdown. The concern becomes more acute when we see that at the present moment, there are no clear indications that the economy has bottomed out," said Chandrajit Banerjee, director general, Confederation of Indian Industry.
"The economy needs the undivided attention of policy makers," he said.
