India’s Ministry of Finance Releases Quarterly Review

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Nov. 6 – The Indian economy grew at a rate of 4.4 percent during the first quarter of the 2013-14 fiscal year, according to numbers released this week by the Ministry of Finance in their Quarterly Review 2013-14.

While real GDP growth below 5 percent is slow by Indian standards, the country’s economic output was still greater than other developed economies, such as the United States and Europe, from April to June of this year.

The agriculture, forestry and fishing sector saw the greatest growth among the economy’s constituent parts with growth of 2.7 percent in the first quarter compared to growth of 1.4 percent in Q4 of last fiscal year.

As a whole, the services sector maintained a steady growth rate of 6.6 percent. Within the sector, trade, transport and financing all slowed compared to the previous quarter. Community, social and personal services, however, picked up in the first quarter, growing 9.4 percent compared to 4.0 percent during Q4 of last fiscal year.

The industry sector saw the greatest decline in growth, expanding only 0.2 percent from April to June. Within the sector, mining and manufacturing experienced negative growth rates.

In their report, the Ministry of Finance cited fiscal tightening and the country’s difficult investment environment for its lower-than-average growth.

“The rise in policy rates coupled with bottlenecks facing large projects such as obtaining environmental clearances, land acquisition, and fuel supply took its toll on investments,” said the report.

Growth Initiatives

With an eye on boosting India’s growth, the ministry has outlined several policy priorities in its quarterly report designed to increase investor confidence and strengthen the country’s manufacturing and export productivity.

Among the initiatives, the Indian government will work to revive the investment cycle through an expedited process for project implementation. The Cabinet Committee on Investment has been established earlier this year to facilitate the process and has already approved over US$60 billion in projects during the first five months of the current fiscal year.

The Ministry of Finance also promoted the injection of stimulus funds into public sector banks. These banks are already well capitalized, but the ministry hopes additional asset liquidity will bolster market confidence.

Several other initiatives were proposed, including plans to increase exports, boost domestic manufacturing and promote household saving.

Despite the country’s sluggish growth compared to recent years of rapid economic expansion, the report maintains a positive outlook for the economy.

“Assuming a normal monsoon and global economic recovery, the Economic Survey had anticipated the growth to be in the range of 6.1 to 6.7 per cent for 2013-14,” stated the report.

If the global economy remains skeptical and sensitive to American monetary policy, the ministry expects year-end GDP growth to be closer to 5.5 percent.

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