Faster than India
Indonesian economy clocks 5.6% growth in Q2 as compared to India’s growth rate of 4.8%
Indonesia, which replaced India as the second fastest growing economy in the world a few years ago, continued to grow faster than India in the second quarter of 2013-14, despite its economic growth rate standing at a four-year low.
India’s growth rate in Q2 of 2013-14 stood at 4.8 per cent, sub-five per cent for the fourth quarter in a row. Compared to this, the Indonesian economy clocked 5.6 per cent growth in Q2, which was the weakest in four years. Indonesia’s economy rose 5.8 per cent in the first quarter of 2013-14. India’s economy, on the other hand, picked up pace from a four-year low of 4.4 per cent in the second quarter of the current financial year.
Indonesia’s economy was hit by weak exports and a low consumption level due to high inflation. Indonesia’s inflation stood at 8.32 per cent in October.
India also witnessed high inflation and consequent high interest rates dictated by RBI policy. As such, the demand of consumers in the economy, indicated by private final consumption expenditure (PFCE), remained low even as it grew higher than Q1. PFCE grew 2.16 per cent in this period against 1.62 per cent in the previous quarter. Last year, this had risen by 2.54 per cent. Retail-price inflation entered double digits in October in India after a gap of six months, clearly indicating that in the third quarter as well, demand might not pick up significantly.
On the other hand, exports were one of the few saviours for the Indian economy. The outbound shimpments rose double digits for three consecutive months in the second quarter (at current prices).
Obviously, China’s growth was the highest. Among the rest of the BRIICS nations however, Russia, Brazil and South Africa saw lower growth rates than India in the second quarter.
Like India’s economy, the Chinese economy also saw higher GDP expansion in Q2, compared to Q1. Its economy rose 7.8 per cent in Q2 of 2013-14, against 7.5 per cent in Q1.
Investment constituted half of the total growth in GDP of China. However, the growth in exports was weak.
The rise in India’s GDP was mainly boosted by good farm produce as it grew 4.6 per cent in this quarter — a two year high. Services remained at more than a decade low of 5.7 per cent.
All this while, the investment rate hovered around 30 per cent of GDP, which could have easily given a growth rate of over 7 per cent, had projects not been stalled or fuel-supply linkage problems in power companies resolved.
Things are not rosy in Russia as well, as it is witnessing the worst slowdown since the 2008 recession. Russia’s GDP in July-September this year grew at the same pace as it expanded in the first quarter–1.2 per cent. This is the weakest growth among BRIICS nations. However, the government and various economists are hopeful of a recovery in the second half of the year – just as in India.
In South Africa, a contraction in mining, manufacturing and the agriculture sector led to a subdued growth of 1.4 per cent in the September quarter against 1.3 per cent growth in the previous quarter.
Brazil’s GDP rose 2.2 per cent compared to last year’s same quarter.
This comes after the Brazilian economy grew at the fastest pace at 3.3 per cent in the last three years in the June quarter.