This shows the sorry state of the economy India is in. While the economy was performing badly was anyone’s guess. But the growth of 4.4% was unexpected. Most analysts were betting on 4.7%. The lower growth rate means India might have the lowest growth rate in about 5 years. Whats more worrying is that planned expenditure might be cut to bring the fiscal deficit under control. As growth slows down the taxes will also come down which means the government will have less to spend.
Manufacturing slumps and so does Mining
The negative in manufacturing is mainly due to slump in demand from Europe, USA and Japan. But with USA showing signs of recovering and also Europe, India does see a growth in manufacturing soon. Mining and quarrying will grow when the iron ore and coal export resumes ( Currently there is a ban on export of both because of litigation).
Next quarter will show better growth if we are to believe the government. What is alarming is elections are due to take place in May 2014. No government is going to take tough decisions before that. Congress led UPA is unlikely to return to power. The opposition is demanding an early election scenting that it is in its (BJP’s) favour.
All said and done growth in India is going to be less than 5% this year. Share prices of all companies are coming down. The only exception is IT and Pharma companies which rely on export revenue. Once the nation’s rating comes down we will see more exodus of FII money. So we have a grim month ahead for investors now.