CRISIL's review on Q4 GDP: Weak inputs, weak output
CRISIL Research has come out with its report on economy. According to the research firm, GDP growth fell to a decadal low of 5 per cent in 2012-13, as growth in the services sector fell below the 7 per cent mark for the first time in last 10 years.
CRISIL Research - Economy first cut
The economy grew by only 4.8 per cent between January-March 2013. Mining GDP contracted by over 3 per cent, utilities sector (electricity, gas, and water supply) growth fell to 2.8 per cent and agriculture growth was below trend at 1.4 per cent. These are the key input sectors in the economy. Almost all sectors in an economy require these inputs. It is difficult to see how, given the slowing growth in these strategic input industries, other sectors of the economy, especially manufacturing, can grow strongly. In fact, growth in the input sectors has slowed to just 2 per cent in 2012-13 from 7.3 per cent in 2010-11.A decline in mining output in the past two years has adversely affected power generation, which in turn is impacting other sectors of the economy. In 2012-13, manufacturing output grew by merely 1 per cent, on the back of a mild 4.4 per cent growth in 2011-12. Slowing private consumption growth and weak exports too hurt the manufacturing sector. Overall GDP growth fell to a decadal low of 5 per cent in 2012-13, as growth in the services sector fell below the 7 per cent mark for the first time in last 10 years.Moreover, prices of most of these inputs continue to rise, driving up input costs for various industries. When inputs are scarce and costly, the rate of return on investment falls, deterring the private sector to undertake new investment. In 2012-13, fixed investment growth slowed to 1.7 per cent from 4.4 per cent in the previous year. Until and unless measures are taken to revive the input sectors, specifically mining and power, an investment-led recovery seems a tall order.Disclaimer: CRISIL Limited has taken due care and caution in preparing this Report. Information has been obtained by CRISIL from sources, which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL Limited has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this Report. The Centre for Economic Research, CRISIL (C-CER) operates independently of and does not have access to information obtained by CRISIL's Ratings Division, which may in its regular operations obtain information of a confidential nature that is not available to C-CER. No part of this Report may be published / reproduced in any form without CRISIL's prior written approval. 
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