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CFA Economics: GDP – A Small Step in the Long Marathon of Growth

November 30, 2013
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The GDP growth of 4.8% in the second quarter for 2013 has been a sign of relief for Indian economy. Following in the major low of 4.4% in the first quarter for 2013, expectation were far too gloomy for this quarter. With major analyst forecasting a rate of maximum 4.7% and some even speculating the growth rate to be less than that of last quarter,actual data surpassed the expectations.

Considering the contribution of different sectors in the growth, electricity and financial services have shown good results. It is a common saying that lightening always strike once at a point. But for manufacturing and mining sector, growth rates have been struck by depression thunder yet again.

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Comparing the results of this quarter with that of previous five years, the growth is on the setback. With growth rates as high as 9.7% in 2008 and 9.4% in 2010, 4.8% growth marks slow recovery. As quoted bycapital economics, India’s road to recovery will be slow and bumpy.

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Economic Affairs Secretary ArvindMayaram expressed his jubilance saying “There were many people who

were predicting that growth will be less (than in the first quarter). I believe in the third and fourth quarters you will see a pick up”.

Clearly, the results have sought mixed responses from around the regions. While many are wary of the slow recovery rate, some are content of the positive increase as compared with that of last three quarters. But at all instances, economists and analysts are keeping their fingers crossed for the growth rate to bounce above the 5% benchmark. Goldman Sachs, a US based leading investment advisory firm predicts that growth rate will be given a push after election polls. Keeping in mind that many projects have been cleared by central cabinet ministry, Goldman Sachs believes that many investors would be lured towards putting their money in India. Given the factors that infrastructure policies have been relieved, rupee has appreciated against dollar and foreign investments might increase, Goldman Sachs have expected a growth rate of 5.5% in next year.

One of the prime factors reflecting growth is inflation. Here’s a look at how inflation rates have varied in the past 5 years on quarterly basis.

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The inflation rate dipped as we moved from the last quarter of previous year to the first of this year and the inflation rate further gained in the second quarter. The same trend was observed in growth rates as well. Keeping this analogy in our tracks, the optimistic approach associated with growth rates will see a rise in the inflation rates as well. The inflation rate for the forthcoming period might even stoop beyond 6.5%.

On the conclusive part, the signals for some growth are shining in the atmosphere but the pace of growth is still under the dark clouds.

If you wish to add anything further to the blog, feel free to post your comments below!


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