Both domestic and eurozone crisis are taking a toll on India’s gross domestic product (GDP), which dropped 5.3% during the first quarter (Jan-Mar) of 2012. GDP was 6.1% during Q4 of 2011, government data revealed.
India’s manufacturing and farm outputs were the most affected sectors of the economy. Manufacturing output contracted to 0.3% compared to 7.3% in the corresponding Q4 of 2011, while farm output came down to 1.7% during the quarter, compared to 7.5% during the same period previous year.
Similar decline was witnessed in construction sector, which slowed down 4.8% during the first quarter this year compared to 8.9% same period last year. The tourism, transport and communications sector data showed growth decelerated from 11.6 to 7% during the quarter under review.
Some respite came from the mining and quarrying sectors, which recorded a 4.3% growth compared to a meagre 0.6% in Q4 of 2011. Electricity, gas and water supply also grew by 4.9% during the Jan-Mar period, compared to 5.1% growth in the corresponding period last year.
Insurance and real estate remained unchanged at 10% during Q4 2011.
India’s industrial production, which accounts for about 15% of GDP, recorded a meagre 0.6% growth during the first three months of the year.
One of the major reasons economists cite for the rupee’s downfall is India’s huge current account deficit.
The fiscal deficit during the 2011/12 fiscal year that ended in March was at Rs 5.2 trillion ($92.53 billion), or equivalent to 5.9% of the gross domestic product.
India’s central bank, the Reserve Bank of India has been struggling to tackle the challenges faced by the country.
“The RBI is fighting a multi-faceted battle – managing the currency, supporting growth, fighting inflation. I think they will wait for fiscal consolidation before cutting rates further,” Rahul Bajoria, regional economist at Barclays in Singapore, told Reuters.