Manufacturing, mining show yields sub 5% growth forecast

A Congress leader told Business Today on the phone: "The 2009 election was a cakewalk. This time, it's very different."

Apart from a host of sociological factors, such as the increasing number of first-time voters, this election comes at a time when the economy is gasping for air. Businesses are crunched for cash, small and medium entrepreneurs are fighting for survival, households are putting off expensive purchases, youth are increasingly getting disillusioned for lack of opportunities. These are perhaps among the most difficult times in the past decade.

And that's what the advance growth figures released by the Central Statistics Office say: India is estimated to grow in 2013/14 at 4.9 per cent, as compared to 4.5 per cent in 2012/2013.

GDP at factor cost (2003-2013)

Sectors such as agriculture, which contributes about 15 per cent to overall GDP and supports almost half the total workforce, grew at 4.6 per cent (including forestry and fishing) - a jump from 1.4 per cent in the previous fiscal year. Manufacturing is down to negative 0.2 per cent from growth of 1.1 per cent. Mining is down to minus 1.9 per cent, and construction grew tepidly at 1.7 per cent. The services sector, which drives nearly half of India's economy, grew at 3.5 per cent in 2013/14, down from 5.1 per cent growth in the previous financial year.

India seems to have averted the wrath of rating agencies by keeping its current account deficit in check and by bringing its burgeoning fiscal deficit under control by ruthlessly cutting expenditure. Even so, the effects of these cuts will hurt for a while. Take gross fixed capital formation (expenditure on asset creation) is down from 2.6 per cent in 2012/13 to 2.1 per cent in 2013/14, while spending on 'major subsidies' is up 13.3 per cent.

Estimates for 2014/15 look somewhat better than the current sub-five per cent growth. Healthier agricultural output, election spending, and hopefully a stable government after elections-which will hopefully give out the right signals to the investor community - could all combine to keep the economy from collapsing. Structurally, the damage runs deep and it could take years to reform the system.