The slowdown is here

1.    Slowest pace: economy growing at its slowest pace in any quarter over the past three years (just 5.3 % in 4^th  quarter (January-March, 2012). ------->pulled down the estimated annual growth rate to 6.5 % (as recently as February, official estimates of 6.9 %)

2.    8.4 % during 2010-11 (impressive 9.2 % in 4^th  quarter)

3.    Even services, which have posted robust growth rates in the past, grew just 7.9 per cent.

4.    Agriculture --------->1.7 % growth------->implications for rural demand and farmer distress

5.    But performance of the industries segment ----------->growing by just 1.9% in the 4^th  quarter --->brought down the overall GDP growth rate

6.    The fall in gross fixed capital formation (GFCF), popularly known as the investment rate, to below 30 % of the GDP for the first time

7.    Morgan Stanley, Goldman Sachs and Bank of America Merrill Lynch (BOFA)-------->downgraded India's growth outlook for 2012-13

8.    The slowdown is attributable to missed opportunities —

o    of policy paralysis

o    parliamentary deadlock

o    an across the board deterioration in most crucial parameters

9.    India's fiscal and trade deficits have ballooned to 5.8 per cent of the GDP.

10. The current account deficit threatens to breach 4 per cent. (‘comfort levels' for CAD should be not more than 2.5-3 % of the GDP).

11. depreciating rupee------>falling to record lows ------>despite the Reserve Bank of India intervention.
depreciating rupee-------inflation,

12. A weaker rupee should theoretically boost export competitiveness as difficult economic conditions in Europe, have contributed to sharp declines in exports to and imports from the EU.

Weak rupee

13. weak rupee ----->oil and other imports more expensive

14. policy paralysis in organs of policy making--------->RBI to wage an almost single-handed fight to preserve the sanctity of monetary policy. Its principal objective

                          i.    to maintain price stability

                         ii.    while endeavouring to meet the genuine credit needs of the real economy.

                        iii.    two objectives ------->in conflict with each other.

15. the central bank in its April credit policy statement --------->boldly cut policy interest rates by 50 basis points------->idea was to kick start economic growth----->But with inflation resurfacing, the central bank is unlikely to persist with further interest rate cuts