India reckons 2012/13 economic slowdown worse than expected

Discussion in 'Economy & Infrastructure' started by farhan_9909, Feb 8, 2013.

  1. farhan_9909

    farhan_9909 Tihar Jail Banned

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    (Reuters) - India's slowest growth in a decade could be worse than anticipated, as preliminary data released on Thursday showed the economy set to have grown 5 percent in fiscal year ending next month, underscoring the urgent need for reforms to boost growth.

    The RBI's forecast for 2012/13 had been 5.5 percent growth, while Finance Minister P. Chidambaram had projected growth of 5.7 percent, down from 6.2 percent in 2011/12, but both appear to have been over-optimisic.

    The preliminary data dimmed hopes for a mild recovery in economic activity in the second half of the financial year, which ends in March, with the government now projecting economic growth of 4.6 percent between October 2012 and March 2013, compared with 5.4 percent in the first half of the fiscal year.

    "It is disappointing," C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council, said of the figures. "My own estimate is when the full-year data becomes available, it can be revised upward."

    He did not give reasons for his optimism.

    (For expert views, click here)

    The government's estimate for the fiscal year 2012/13 pegged farm output growth at 1.8 percent, while the manufacturing sector was expected to show growth of 1.9 percent. The services sector, which makes up more than half of India's GDP, is forecast to slow down to 6.6 percent from 8.2 percent a year ago.

    "These all look a little low to us, but it is the service sector estimate, where high frequency information is most lacking, which is the biggest surprise," Credit Suisse analyst Robert Prior-Wandesforde said.

    The figures will pile pressure on Prime Minister Manmohan Singh's Congress-led government to unveil a growth-oriented budget on February 28 for the next fiscal year, beginning in April.

    FISCAL CHALLENGES

    But faced with an arduous task of trimming a swollen fiscal deficit that has put India's investment-grade credit rating in peril, Singh can ill-afford to boost government spending to prop up growth ahead of a national election due by May 2014.

    Chidambaram has already ordered spending cuts in welfare, defence and road projects for this financial year.

    According to the GDP estimate, growth in government expenditure is on track to moderate to about 4 percent in 2012/13 from 8.6 percent a year ago.

    Economic growth likely eased further to around 4.8 percent in the quarter ending in December, mainly as a result of deep cuts in government spending, a senior official at the statistics ministry told Reuters on Thursday. The GDP data for the December quarter is due on February 28.

    For graphic on GDP, industrial production, click link.reuters.com/qaw46s

    Critics warn that at a time of low growth, lower spending risks deepening the slowdown without helping the deficit-to-GDP ratio.

    But others argue the government has little option but to tighten its belts. A drop-off in investment, hurting growth, is blamed in part on high public spending that is funded through a heavy market borrowing and crowding out the private sector.

    Indian business leaders and foreign investors are pushing Singh to create better conditions for economic growth by fast-tracking stalled tax reforms and making it easier for firms to acquire land for new projects.

    STRUCTURAL WOES, SLOWING CONSUMPTION

    Structural bottlenecks have restricted India's growth potential to around 7 percent, according to the central bank, ruining the aspirations India has for the near double-digit expansion needed to provide jobs for a burgeoning population.

    Road, power and mining projects worth billions of dollars have been held up for years because of delays in getting multiple regulatory clearances.

    Capital investment is expected to slow down to an annual 2.48 percent in 2012/13 from 4.4 percent in the previous year, the data on Thursday showed.

    Growth in private consumption is forecast to moderate to 4 percent from 8 percent. This could help keep inflation in check and encourage the Reserve Bank of India (RBI) to cut interest rates further to help spur investments and consumer demand.

    The RBI last month cut interest rates for the first time in nine months, trimming the repo rate by 25 basis points. But it also warned that, while halting the slide in economic growth was a priority, it had limited room for further easing unless inflation and a high current account deficit improved by more than expected.


    India reckons 2012/13 economic slowdown worse than expected | Reuters
     
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  3. cir

    cir Senior Member Senior Member

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    Inflation rate is double the growth rate。

    lol!
     
  4. farhan_9909

    farhan_9909 Tihar Jail Banned

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    next year growth is expected even worse below 4%


    under so much problems pakistan and india growth this year wont have difference more than 1%

    i remember in 2012 western and indian media published india will surpass china in growth while right now even bangladesh left them behind :rofl:
     
  5. Tianshan

    Tianshan Regular Member

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    i think india will bounce back this year.
     
  6. sob

    sob Moderator Moderator

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    Had your two bits of fun have we dear.

    Never ever compare percentages with different base figures. This is the most important thing to remember.

    India has to grow at 12% and China at 8%, that will be comparable and for Pakistan-India, you are intelligent enough to figure out.
     
  7. Shirman

    Shirman Regular Member

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    Pathani Logic does not work Alteast in Economy Farhaan Bhai ....India's economic foundations r strong n unlike Paki ecomomy and Rupee ours is still Standstill..........
     
  8. Ray

    Ray The Chairman Defence Professionals Moderator

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    I am not an economist, but Pak Rs is Rs 100 = $1!

    Doesn't speak much of the purchasing power.
     
  9. Singh

    Singh Phat Cat Administrator

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    4% GDP Growth of Indian economy is equivalent to 60% of Pakistani GDP.

    And we will surpass Russia, Italy definitely next year and become the 8th largest economy in the world nominally. We are already the world's third largest economy adjusted for purchasing power parity

    Growth is a misleading term, if a Beggar with 1 rupee gets another rupee, his growth is 100% but if a trillionaire gets only 40 billion dollars then his growth is just 4%. So who is doing better, the beggar or the trillionaire ?
     
    Last edited: Feb 13, 2013
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  10. Tianshan

    Tianshan Regular Member

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    actually you don't have to surpass us that much to start catching up.

    even if you are only 1 or 2 percentage points above our gdp growth, it will start going into your favor due to compound interest. since it builds up every year.
     
  11. Ray

    Ray The Chairman Defence Professionals Moderator

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    Chances to bounce back are slim because 2014 is the election year.

    As you are aware that in a democracy elections can be won by keeping the voters' happy rather than having economic belt tightening!

    I am pragmatic.

    China has her own path and India will have to chart its own path.

    Each to its own way!

    Comparisons are not possible owing to vastly different parameters that govern growth.
     
    Last edited: Feb 13, 2013
  12. Ray

    Ray The Chairman Defence Professionals Moderator

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    That is a very nice way to explain.

    It is ideal way to unravel and lay bareboned for lay persons like me to understand the gobbledygooks of economy and its terms.

    Thanks.

    Notwithstanding, I am sure Pakistan will bounce back once they have stopped the internecine sectarian killing, brought under control their endless numbers of Taliban factions and have a proper democracy going that is beyond the control of their Army and ISI.

    And of course, not to forget, shoring up their finances with generous aid from the US, Saudi Arabia and the Gulf countries as also infrastructural aid from China at friendship rates.

    I have hope in Pakistan!
     
    Last edited: Feb 13, 2013
  13. Apollyon

    Apollyon Führer Senior Member

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    I predict 2013-14 to be same as 2012-13 if not worse.
    2014 is a election year and Congress will dole out as much as they can. There are tit-bits going on for another farmer loan waiver and schemes like Direct-Cash transfer will take away the government funds from infrastructure projects, pretty bad situation.
     
  14. Shirman

    Shirman Regular Member

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    Ok some knowledge to Pakis Want to know why ur currency is d evaluating b cause there is speculation amongst investors who want to invest in ur country that what will happen when ur Donor USAID stops giving aid once withdrawal happens from afghanistan......Also relations n trade with India which Pakis were hoping r bubbleburst with ongoing hickups in so called peace process......

    Aso PRC did its economic reform in 1978 under Deng Xiaoping nd Zhao Enlai if i am not mistaken thats 15 years before India embarked on its Eco Reforms in '93 under Narsimha n Manmohan singh................
     
  15. Daredevil

    Daredevil On Vacation! Administrator

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    May be its blessing in disguise that these economic situation will lead to kicking out of this corrupt and inept UPA government.
     
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  16. Tianshan

    Tianshan Regular Member

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    ok maybe there are some political events that i wasn't aware of, but my point is that india's economy is one of the strongest in the world. in the brics, brazil and russia are only so-so.

    growth will bounce back in india in a very strong way, maybe not in election year but after.
     
  17. Ray

    Ray The Chairman Defence Professionals Moderator

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    You are only being kind.

    Reality is very different, if you permit me to say so.
     
  18. Tianshan

    Tianshan Regular Member

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    not being kind at all.

    even with the worst governance in the world, india will still grow. this is just a fact, the underlying factors (demographics, increasing entrepreneurship, growing middle class, etc) are too strong that even the worst government cannot destroy india's growth, only slow it down for a few years.
     
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  19. Ray

    Ray The Chairman Defence Professionals Moderator

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    Thank you.

    Of course India will grow.

    But that growth would not commensurate with its potential.

    Too much of politics and lining of pockets.

    If we could do what China does to the corrupt, then things would be different.

    And there is too much of emphasis on populist and useless policies.
     
  20. sob

    sob Moderator Moderator

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    I was explaining to our friend the difference in the scale of the economies and the base effect. @Singh has done a nice job to put it in a better perspective.

    The first and last time I tried to play with percentages in a presentation early in my career, I was hauled by the big boss for a 20 minute lecture which I have not forgotten even after so many years.
     
    Last edited by a moderator: May 10, 2015
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