GDP Data - May 2013

Today’s GDP data of 4.8% hasn’t come as a shocker and is in line with what was expected. Our Prime minister’s dream must have shattered after he announced yesterday that the days of 8% GDP aren’t far away, during his Japan trip.

Today’s GDP data has made history as now FY13 will go down as the year the country clocked its slowest growth in a decade. Even after all this the government hasn’t learnt much. It is gripped with policy paralysis not to mention the corruption cases coming out in multitudes on a routine basis.

Going forward do the things rubicund? Nothing has changed much in our country in the last couple of years. I mean the changes in terms of infrastructure. By which I mean roads, rail and air network. There are fewer new roads being built, no new rail routes being planned or no new capacity expansion seen anywhere across the nation on the rails. There any new airports being made, no to overlook the huge debts all the domestics airlines are in today – thanks to Air India (partly). As a quick reckoning there are infrastructure projects worth Rs 10 lakh crore, 41 in total, pending due to various approvals. If a country has to grow, it has to first build up its infrastructure and get the entire nation connected. This will not only ensure a grwoth which is inclusive but also reduce inflationary pressures.

The Indian Government is fronting the twin deficits of current account and fiscal deficit. The situation is slightly under control as the inflows are strong, see the levels of Sensex. As the USD-INR pair settles or INR appreciates in terms of USD, the increase in FII outflow will leave the nation with even burgeoning twin deficits. The party on the street is only due to liquidity flush, which no one knows will last until when. As I always reiterate the fact that the stock prices of 30 companies in the BSE-30 is not the true representation of the entire nation’s growth.

If the government is serious in getting back the nation into a growth trajectory, it needs to do more than just representing India abroad. It needs to change stance on various policy measures. It needs to create more single window clearances for new businesses. It needs to create stringent laws on corruption so that the attitude of ‘babus’ changes from asking under the table cuts to performing what is required out of their jobs. I know it’s a tall order but someone has to initiaite.

Prime Minister himself, many-a-times has mentioned that India needs to create 10-15 million jobs annually to recapture the rapid growth rate, but this job creation is yet to be seen. There is no CAPEX as there’s plenty excess in the system, as is evident with lower car sales in the last quarter. The amount of FDI that is talked about now is very miniscule. Newer sectors need to be opened up and the system made more conducive for foreign investments.

The current data also does not necessarily indicate bottoming out of the growth which may have further downsides going in future. Bluntly speaking I don’t see anything changing radically before the next government comes into power before 2014.