Revival of economy unlikely in near future: Economists

NEW DELHI: Economists and consultants are not upbeat over the revival of the Indian economy in the near future. Economic growth in April-June would have been lower than 4.4%, but for the government spending, credit rating agency Crisil said. But, given the present economic condition, government spending can not be sustained in the coming quarters. Despite good monsoon, Crisil said, "We now see downside to our GDP growth forecast of 5.5% for 2013-14."

"It is unlikely that GDP number will look up in near future unless the structural deficiencies in the industry sector are addressed," Anis Chakravarty, Sr. director, Deloitte India, said. The number would have been worse. However, the US recovery had partially propped up services, as we are seeing from the finance, insurance and business sectors, he added.

Multinational bank BNP Paribas had said on Wednesday, "With RBI set to sustain, even extend, monetary tightening, we now expect the downside risks facing the Indian economy, to largely crystallize over the next six-to-nine months. We now target GDP growth of 3.7% in FY-14 compared to earlier forecast of 5.2%."

Chakravarty said current account deficit continued to be at an unsustainable level. It is unlikely that there will be an economic pickup in the short term, unless structural issues such as manufacturing and mining bottlenecks, reduction in current account deficit and lowering pressures on the fiscal outflows are addressed. "India runs a risk that attractiveness of the India growth story may suffer an untenable damage."

Crisil said in Q1, government spending was a significant driver as growth in private consumption weakened to 1.6% and investments fell by 1.2% compared to a year ago due to lack of policy reforms, procedural delays and persistent supply-side bottlenecks. "Higher government spending lifted growth of community, social and personal services to 9.4% in Q1, 2013-14 compared to 4% in the previous quarter. Without increase in government spending, community, social and personal services would have, at best, maintained its average growth rate of the past few quarters and GDP growth in Q1 would have been even lower at around 4%," the Crisil report pointed out.