DNA Edit: GDP green shoots

Finally, it looks like the Indian economy has shed the baggage of demonetisation and the disruptive effects of the GST.  Estimates of the Gross Domestic Product (GDP) for the quarter ending December 2017 are nothing less than music for the current regime’s ear as they indicate that India’s GDP growth rate has notched up to an impressive 7.2 per cent, the highest in the last five quarters. It has put India back on the global map. The country can now boast to foreign investors about being the fastest growing economy in the world, trumping the massive economy of China in the race. To be fair, the 7.2 per cent growth registered is still not setting the same pace achieved in FY17, when the growth rate had clocked in a neat 7.5 per cent.

However, the Finance Ministry has much cause for cheer given that the narrative has been completely upended in the last two quarters, which recorded growth rates of 5.7 per cent and 6.5 per cent respectively. From 5.7 per cent to 7.2 per cent is a long leap and to have made this leap in a span of only three quarters is no less than a paean to the resilience of the Indian economy, which despite weathering the twin systemic shocks is still soaring. However, this recovery does not look sustainable. Interestingly, the GDP estimates released by the Central Statistical Office does not sit well with data released by the Centre for Monitoring of Indian Economy (CMIE).

According to the business information company, investment proposals for the December quarter sunk to a 13-year low of Rs 76,800 crore compared to Rs 1,15,000 crore bids received in the quarter ending September. Additionally, this GDP growth has been boosted, thanks in large measures to spendings by the government, which is expected to be at 10.8 per cent of the GDP in the current fiscal year. Given how the government is already battling a threateningly bulging fiscal deficit at 113 per cent of the target set for FY18, it will be singularly difficult for the government to keep artificially injecting growth in the economy.

If Finance Minister Arun Jaitley wants to honour his commitment on fiscal rectitude, he has little choice but to tighten India’s belt on a range of social security and farmer-oriented schemes. But how possible is that in a year with eight polls lined up; four of them in big states? If the BJP government is keen on making it into the good graces of the farmers- a community it has managed to alienate in the last two years- it will have to keep pumping funds for the upliftment of farmers. Additionally, there are fears that the RBI could harden monetary rates anticipating an uptick in inflation, thanks to this growth spurt. If this does transpire, the incipient revival in the private investment sector will tank even before it finds its feet.

Meanwhile, there are no long-term solutions that are being spelt out by the Finance Ministry on making Public Sector Banks (PSBs) viable. FM Arun Jaitley should take heed of Winston Churchill’s prescription, who famously opined that one should never let a good crisis go to a waste. The PNB fraud should be the catalyst for privatisation that the banking domain has been yearning for decades.