GDP figures are proof that India is an emerging giant

During the final quarter of 2006-07, India’s real gross domestic product decelerated to 9.1% from 10% during the same quarter of the preceding fiscal, according to the latest data released by the Central Statistical Organisation. But the growth rate is still robust and more importantly, it is the manufacturing sector that is calling the shots. For the year as a whole, the economy expanded at the rate of 9.4%, compared with 9% in 2005-06. This rate is also higher than the growth of 9.2%, anticipated in the advance estimates released by the CSO.

With the growth juggernaut maintaining a strong momentum, the per capita income is also sharply up 14.3% to Rs 29,382 last year. This is on top of a spurt of 12.1% in 2005-06. Even adjusted for inflation, the trend in per capita national income is gratifying. It rose by 7.4% and 8.4% during the last two years (at 1999-00 prices).

The tempo of investment too has proceeded at a brisk pace of late. The rate of gross fixed capital formation, which stood at 26.3% in 2004-05, quickened to 28.1% in 2005-06 and further to 29.5% in the just concluded fiscal.

According to CSO, the modest slide in GDP growth rate in the final quarter of 2006-07 vis-à-vis the year ago period was on account of a poor showing in agriculture - the growth rate here had slackened to 3.8% from 6.2% - and in construction to 11.2% from 16.1%. Assorted financial services and business, community and social services also witnessed a slowdown of sorts. But this was partially offset by a commendable show by manufacturing, which jumped to 12.4% from 9.4%, helped by an improved performance from mining and quarrying, electricity and trade, hotels etc.

A word of caution may not be out of place here. CSO’s estimates are very tentative and are therefore subject to revision in the light of more data pertaining to the last quarter of 2006-07 becoming available in the due course. Therefore, it should be taken as indicative rather being definitive. For example, many figures for the previous quarters have been modified in the latest data released by the agency.

The GDP growth for the first quarter of the last fiscal has been reworked to 9.6% from the earlier 8.9%, for the second quarter to 10.2% from 9.2% and for the third quarter to 8.7% from 8.6%. In the case of manufacturing, the revision has been substantial - to 12.3% from 11.3% in the first quarter, to 12.7% from 11.9% in the second quarter and to 11.8% from 10.7% in the third quarter.

But there is no denying the one overarching reality - we are an emerging economic giant and proof can be had from the growth story portrayed by official national income data. Consider the latest numbers put out by the CSO. Despite the setback in the last quarter of 2006-07 - if the slowdown may be termed a setback  as the spurt in real GDP was quite substantial at over 9% - the Indian economy has catapulted itself in to a high growth orbit. There is a qualitative transformation as well in that it is the manufacturing sector that is calling the shots.

At 12.4%, the contribution of manufacturing during the January- March 2006 was the highest ever since the system of quarterly estimation of GDP came into vogue just over a decade ago. Not only does this surge represent a three percentage point improvement over the GDP emanating from the manufacturing activity in the same period of 2005-06, but also it is also a far cry from the poor showing that persisted till 2001-02. Since then, there has been no looking back, with the real output in manufacturing steadily climbing up.

India seems to be entering a phase of manufacturing -led GDP growth. In 2005-06, GDP rose by 9% while manufacturing rose by 9.1%. In the advance estimate for 2006-07, the rise in real GDP was envisaged at 9.2% of which manufacturing was projected to increase its GDP by 11.3%. But revised estimates, now available, indicate that the performance has been more flattering than earlier indicated -  a  9.4% surge in GDP propelled by manufacturing. During the first three years of the new millennium, India had fared poorly with GDP growth ranging between 3.8% to 5.8%.

But from 2003-04, economic advance has been rapid — and sustained. But, along with this growth story, the officialdom’s ability and resources to disseminate key economic data also seem to have improved remarkably. Who would have imagined that, the many key statistics including GDP at market prices, private and government final consumption expenditure and gross fixed capital formation for 2006-07 would be in the public domain barely two months after the close of the fiscal year.