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India’s FY’14 GDP growth at 4.7%

June 2: For the second year in a row, the Indian economy grew less than 5% in 2013-14, data released by the statistics department confirmed, exerting greater pressure on the new government to accelerate reforms and kick-start stalled investments.

Gross domestic product (GDP) grew 4.7% in the year ended 31 March, 2014, marginally higher than the 4.5% growth in the previous year, the statistics department said.

It was lower than the 4.9% expansion predicted by the department.

In the three months ended March, the economy expanded 4.6% - the eighth successive quarter where growth was below 5%.

The data, coming shortly after the government of Prime Minister Narendra Modi assumed office, piles on more pressure on the new administration to attract investments and get stalled projects moving, analysts said.

The manufacturing sector contracted 0.7% in 2013-14 compared to 1.1% growth in the previous year. The marginally higher GDP growth was led by agriculture, which expanded 4.7% compared to 1.4% in the previous year. While most services sectors slowed, growth in financial services quickened to 12.9% from 10.9%, aided by the inflow of non-resident Indian deposits.

Growth in community, social and personal services, which mostly represent public expenditure by the central and state governments, slowed significantly in the fourth quarter to 3.3% from 5.7% in the third quarter because of compression in Plan expenditure by the central government to lower the fiscal deficit.

Besides, high inflation has prompted the Reserve Bank to raise lending rates. High borrowing costs have dampened purchases of cars and other consumer goods, which are mostly bought through loans.

High inflation and weak income prospects have dented consumer sentiments. Investment growth fell 0.4% during October to March and remained flat for the full year.

Construction continued to register another year of low growth at 1.6%, owing to low levels of infrastructure activity, but analysts expect investment to pick up.

Weak demand, high borrowing costs and stalled projects on account of delays in securing government approvals have contributed to the sharpest economic downturn in India in a decade.

The new government has to present the budget for the current fiscal (2014-15) in the first week of July which is expected to be passed by July 31 after the debate.

After taking charge as finance minister, Arun Jaitley said his priority would be to restore the pace of economic growth and curb inflation while keeping the focus on fiscal consolidation.