India’s struggling GDP growth story: 10 things the numbers say

India's GDP growth rate declined by a disappointing 5.3 per cent in the quarter ended March 2012, the lowest since 3.6 percent in the January-March quarter of 2003, according to data from Thomson Reuters. It last hit this level in the December quarter of 2008. Here are 10 things about the economy that the data tells us.

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Growth below expectation: India's economy grew at an annual rate of 5.3 per cent in the quarter ended March 2012, much lower than expectations of 6.1 per cent projected by a poll of 31 economists. Experts see a bleak growth rate looking forward and stress on policy reforms by government to kickstart the manufacturing sector. The GDP numbers mean that the country's growth slowed for eight successive quarters through the three months ended March 2012. It is also the lowest GDP growth rate in 13 quarters; the last time India registered the same rate of growth was in the quarter ended December 2009, when the global financial system had all but collapsed in the aftermath of the bankruptcy filing by Lehman Brothers Holdings Inc.

Weakest fiscal performance in 9 years: India's growth rose 6.5 per cent in the fiscal year to the end of March 2012. This is the lowest growth rate since 2002-03 when it fell to 4 per cent in the wake of a global slowdown. It is also a sharp slowdown from the previous fiscal's 8.4 per cent.

Why did Sensex, Nifty fall: The BSE Sensex hit the lowest point of the day after data indicated that the Indian economy grew at a slower than expected pace in the March quarter. Since corporate profits are to economic growth, a slowdown adversely affects a company's bottomline. The fall in Sensex and Nifty indicates that investors expect corporate profits to dip going forward.

Agriculture growth falters: The farm sector, which is the single largest employer in the country but one of the lowest contributors to absolute GDP, grew at a measly 1.7 per cent against 7.5 per cent in the corresponding period last fiscal. This is bad news as rural consumption drives considerable amount of growth for leading Indian companies. Poor agriculture growth means rural consumers would have less money to spend going forward.

Manufacturing and services struggle: A key drag on growth numbers were the industry and services sectors -- both key drivers of growth -- which came in lower than expected, at 1.9 and 7.9 per cent against 7 and 10.6 per cent in the year-ago period. The manufacturing sector contracted (-) 0.3 per cent from 7.3 per cent in the same period last fiscal.

Exports hurt: The corporate sector has witnessed its worst slowdown in recent times. Confidence and demand have been weighed down by higher interest rates, a challenging export environment, and, perhaps most important, policy mismanagement and political deadlock, according to Moody's Analytics. A sluggish global economy has also cut demand for India's goods overseas, despite the falling rupee, which means exports may also not grow enough to compensate for the domestic weakness.

Expect fewer jobs: The ability of companies to create jobs is hurt during a successive slowdown in the GDP growth rate. Company could conserve cash and put expansion on hold as a result of weak growth prospects going forward. Lower investment is also partially a fallout of a high interest regime to keep inflation in check.

No scope for economic stimulus: The current account deficit is the highest since 1980. This occurs when a country imports more than it exports. Costly subsidies have pushed the fiscal deficit to 5.9 per cent from a target of 4.6 per cent of GDP in the fiscal year that ended in March 2012. This leaves little headroom for any fiscal stimulus. The surging budget deficit means the government cannot provide for any tax related incentives to stimulate growth.

RBI cannot stimulate the economy either: A sharp 25 per cent drop in the rupee over the past 9 months could hurt RBI's ability to cut interest rates because doing so could increase inflationary pressure. There can be no growth stimulus from RBI through a lower borrowing cost as it battles stubbornly high inflation.

No option but to reform: Reforms such as opening India's supermarket sector to foreign chains like Wal-Mart stuttered as the government failed to convince powerful coalition allies. Inflation is the highest among the so-called BRICS group of major developing nations. The government must push fiscal consolidation to help reduce inflation and the current account deficit, the Moody's report said, warning that an expected rise in global oil prices could again force New Delhi to overshoot its spending target. In short, the government needs to cut subsidies on fuel, fertilizer and food.