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As a village boy, I was very hard working. I had to travel 6 km
every day to reach my school. There was no road to go to my
school. The road was constructed only after I became a minister.
— Finance Minister Pranab Mukherjee on being told that
he is known as a workaholic.
As expected widely, a poor kharif crop, the result of an extremely
deficient southwest monsoon last year, led to the economy
slowing down markedly to 6 per cent in Q3 of the ongoing fiscal,
from 7.9 per cent in Q2 and 7 per cent in H1. Farm incomes dipped
2.8 per cent due to 14 per cent decline in rice production, 10 per cent
in pulses, 9 per cent in oilseeds, and 12 per cent in sugarcane, the
major kharif crops. However, a freefall in economy was contained by
industry that expanded 12 per cent, speeding from 8 per cent in Q2
and 5 per cent in Q1. Services grew less by 6.3 per cent due to decline
in government revenue expenditure.
What underscores the perception about prospects and ensures
future economic growth are the capex programmes. The picture in
this context is comforting. Gross fixed capital investment at constant
prices was up by 8.9 per cent in Q3, improving on 7.3 per cent in Q2,
4.2 per cent in Q1, and stagnation a year ago. Real income from the
construction industry matched this pace.
Economic growth during the first three quarters of the fiscal worked
out to 6.7 per cent, lower compared to 7.1 per cent in the corresponding
period of 2008-09. But, apart from farm sector that declined
due to bad monsoon and a steep lower growth in community services,
largely government expenditure sans fiscal excesses of last year,
all other sectors helped push up growth. Manufacturing doubled its
pace and mining quadrupled the year-ago rate. Construction expanded
7.4 per cent against 6 per cent a year ago and real investment in
gross fixed assets increased by 6.9 per cent, a half time more than
that in the first three quarters of the preceding year. The ratio of capital
investment to GDP at market prices improved from 33.1 per cent
to 33.2 per cent.
Now, going by performance over the first three quarters, let us see
what lies in store for the fourth quarter of the current fiscal. In this
context, just last month, factoring all physical indicators done in the
present quarterly estimates, CSO had assessed economic growth for
the current fiscal at 7.2 per cent. If this rate has to materialise, the
economy needs to grow by 8.6 per cent in Q4, bettering 6.7 per cent
of first three quarters. This seems plausible because, firstly, it would
come over a subdued Q4 last year; secondly, buoyancy in industry
and services segments seems to have continued, according to available
pointers; and thirdly, good rabi crop would be reflected in the
quarter. However, if structural relationships hold good the quarter
could see capital investment stagnating at year-ago level and construction
slowing to half the rate of the first three quarters. So, let us
watch out for economic performance in the fourth quarter.
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