#dnaEdit: The silver lining

It is good news that the economy is expected to grow at 7.6 per cent during 2015-16, according to estimates released by the Central Statistics Office (CSO). India thus remains the fastest growing economy in the world, leaving China behind at 6.8 per cent. Of course, as Reserve Bank of India (RBI) governor Raghuram Rajan had reminded that China is a USD 11 trillion economy compared to India’s USD 2.1 trillion. But all the same, the India clip brings cheer not just to Indians but to the rest of the world as well, which is desperately struggling to get out of the coils of recession. It is a different matter whether India can provide the stimulus for a global economic recovery or even anchor the recovery. This is unlikely to happen because India is not in a position to buy things from the world, especially from the commodities-exporting countries, including the oil producers. India’s imports and exports have been sliding rather dramatically. 

There is no doubt that 7.6 per cent GDP growth rate is reassuring for the country because it shows that the economy is holding its own and is not sliding back. There is economic stability if not vibrancy. Agriculture is expected to grow at 1.2 per cent on improved showing in Q4 of 2.2 per cent, and food grain production is higher at 252 million tonnes than the advanced estimates. This should enable the government to combat rural distress. The growth in manufacturing at 9.3 per cent is slightly lower than the 9.5 per cent projected in the Advanced Estimates in February this year. It is necessary to pay attention to the fact that the private corporate sector, which accounts for 69 per cent of the sector has grown at 10 per cent, while the unorganised sector representing 25 per cent, whose growth is estimated through the Index of Industrial Production (IIP), stands at the figure of two per cent compared to the advanced estimates figure of 3.9 per cent. Manufacturing cannot improve if a quarter of the sector is at the lower end of the productivity spectrum.

One of the interesting, intriguing aspects of the CSO figures is the difference between the GDP estimates and the GVA ones. The argument has been that GVA is the more sophisticated and accurate way of assessing the real state of the economy. Without going into the substantial merits and demerits of the issue, the differences between the figures for GDP and GVA seem to tell a story of their own. According to the CSO fact sheet, the GDP at constant (2011-12) prices is Rs113.50 lakh crore, which translates to 7.6 per cent growth rate. The comparative figure for the GVA is Rs104.27 lakh crore, which means a 7.2 per cent growth rate. In simple terms, it means that the total turnover of the economy as represented by the GVA is less than its total product, which is the GDP. That is, consumption is lagging behind production. The Gross National Income (GNI) figure of Rs112.13 lakh crore, which means a growth rate in the GNI of 7.5 per cent during the same period of 2015-16 shows that the earnings, which is included in the GNI, from abroad have been less than they could be. There is a need to pay attention to these figures to know what needs to be done to keep the economy on the move.