New Delhi: After hitting a four-year low in the first quarter, the economy grew by a higher-than-expected 4.8 per cent in the September quarter on an uptick in agriculture and factory output, although a rise in the fiscal deficit and inflation dampened sentiment.
Gross domestic product or GDP rose 4.8 per cent in July-September compared with 4.4 per cent in the previous quarter, according to an official statement here. The July-September period was the fourth successive quarter of economic growth below 5 per cent and compared with 5.2 per cent expansion in the same period last year.
While Finance Minister P Chidambaram exuded confidence that the growth rate will rise to 6 per cent next fiscal, Economic Affairs Secretary Arvind Mayaram said the third and fourth quarters will see a pick up to help attain at least 5 per cent growth for the fiscal.
The recovery in the July-September quarter was dampened by an increase in retail inflation for industrial workers to 11.06 per cent, strengthening the Reserve Bank's case for an interest-rate hike to fight rising prices. Stating that there were “no quick fixes” for taming prices, Chidambaram said inflation has got entrenched and monetary policy has little impact on it.
While the Finance Minister has said the “red lines” on fiscal deficit will not be breached, the difference between government receipts and spending touched Rs 4.57 lakh crore, or 84.4 per cent of the budget estimate, in the first seven months of the current fiscal.
The rupee weakened 0.1 per cent to 62.4487 per dollar while the 30-share Sensex rose 1.3 per cent.
Recovery in Asia's third-largest economy has been wobbly as the RBI raised interest rates to curb inflation.
There are expectations of another hike at the central bank's next review due on December 18.
Blaming the growth slowdown on global factors, Prime Minister's Economic Advisory Council Chairman C Rangarajan said, “I am optimistic that the second half will be spurred along by increased manufacturing, leading to a more stable rupee.”
Manufacturing rose 1 per cent during the July-September quarter while agriculture output soared 4.6 per cent. Growth in the mining sector, however, fell 0.4 per cent.
The retail inflation rate for industrial workers rose to 11.06 per cent in October from 10.7 per cent in the previous month on higher food and electricity prices. The fiscal deficit, which stood at 71.6 per cent of the budget estimate in April-October of 2012-13, climbed to 84.4 per cent this year.
The deficit excludes subsidies the government will have to pay for selling diesel and cooking fuels below cost. As much as Rs 45,000 crore of the fuel subsidy to be paid this fiscal will be carried over to the next year as all budgetary provisions have been exhausted in the first six months.
As per official data, net tax receipts for the first seven months of the fiscal year touched Rs 3.56 lakh crore, while total expenditure was Rs 9.22 lakh crore. Tax revenue collection slowed down to 40.3 per cent of the budget estimate (Rs 8.84 lakh crore) as against 43.3 per cent in the previous fiscal.
