Indian economy in a shambles
Tuesday, 12 February 2013 15:51 PNS | New Delhi / Mumbai
The Government's forecast of a mere 5 per cent rise in GDP this fiscal was fortified on Monday by two major indicators of economy. In the first major indicator domestic annual car sales are set to be in the negative territory for the first time in a decade. Automobile sector affects a big base of small and big ancillary industry in the country.
In another such indication, Reserve Bank Governor Duvvuri Subbarao warned that the country was headed for the highest ever current account deficit (CAD) this fiscal as the CAD rose to 5.3 per cent of GDP in the second quarter.
Completing the woeful economic scenario, he went on to add that inflation which had slowed down to a three-year low of 7.18 per cent in December 2012, is “still high”. He painted the grim picture while addressing the convocation of the central bank-promoted Indira Gandhi Institute of Development Research in Mumbai.
“Last year, CAD was 4.2 per cent of GDP, but this year we expect it would be significantly higher than that. It's going to be historically the highest CAD measured as a proportion of GDP,” the Governor said adding that it would not be a great worry if the widening CAD is on account of import of capital goods, but here it is high on account of import of oil and gold. The trade gap is widening mainly because of higher import of oil and gold. The third quarter numbers are expected later this week.
He also expressed concern over the way the CAD, which is the gap between forex gained and forex spent, is being financed by volatile inflows instead of more foreign direct investments.
High CAD and seriously slowing automobile sector suggest that the country is headed for a much more gloomy situation and the slump is yet to hit the bottom.
Indian economy in a shambles