Crisil Research predicts that India’s GDP growth rate will rise to 6.7 per cent in 2013-14 pushed by revival in private consumption.
This will be largely driven by improved agriculture output on the back of a normal monsoon. But welfare spending ahead of General Elections in 2014 will also play a large role in boosting GDP growth.
The upswing in agricultural activities will result in higher wages for these activities and overall, agriculture is expected to account for 60 per cent of the rise in GDP growth in 2013-14. The estimate considers the direct impact of the normal monsoon on agriculture growth and the positive spillovers of higher agricultural growth to the industry and services sectors.
The other major factors contributing around 40 per cent to the pick-up in 2013-14 GDP growth will stem from pre-election welfare spending by the Government, coupled with lower interest rates and a tepid recovery in exports amid a marginally improved global outlook.
But downsides also exist to the GDP growth prospects, such as the failure of the monsoon in 2013 and deterioration in the global economy’s health.
Investment dip
Crisil has noted that the projected rise in GDP growth notwithstanding, the investment pipeline is likely to be bottled up, despite progress on the Land Acquisition Bill and the National Investment Board set up for fast-tracking infrastructure projects.
The research firm has estimated that investment by private firms could drop by as much as 35 per cent in nominal terms in 2012-13 and a number of companies have also shelved and deferred investment projects.
Industrial growth has been pegged at 5.4 per cent in 2013-14, up from 3.2 per cent in the first half of 2012-13, but below the 20-year average of 6.9 per cent and 10-year average of 7.9 per cent.
Crisil noted that the manufacturing sector has been adversely impacted by declining private consumption, corporate investment and export demand, while mining output has been crippled by a policy logjam.