Reform momentum intact as GDP back series shows growth upturn

The National Statistical Commission Data on back series GDP growth, though only a draft and not final, has generated a lot of political heat. The fact that several other economic parameters, including inflation, fiscal deficit and implementation of policies are better during the current regime, despite slower economic growth, has however given the debate a new twist.

Corruption too appears to be less though there is no data as yet to substantiate it.

N R Banumurthy of National Institute of Public Finance and Policy (NIPFP), who headed the sub-committee of the committee on real sector statistics headed by Sudipto Mundle, told DNA Money that one major outcome of this back series data is that irrespective of which political party headed the government, there is continuity of reforms launched in1991. “It augurs well for the economy to grow at its potential.”

Banumurthy believes that former vice chairman of Niti Aayog Arvind Panagariya is justified in saying that former prime minister Narasimha Rao began big ticket economic reforms, which were pursued vigorously by former PM late Atal Bihari Vajpayee and this together had helped put the Indian economy on a high growth pedestal.

The major outcome of the analysis of the back series GDP growth data is that there is continuity in reforms both during UPA and NDA regimes.

Several economists have argued that the back series clearly showed demonetisation and rollout of the Goods and Services Tax (GST) are two reasons for a temporary slowdown growth under the current regime.

But Banumurthy believes that demonetisation is good in the long run. “The Modi government has done well on several other fronts. Taking advantage of digitisation, the implementation of schemes has been far better. Jan Dhan Yojana and direct benefit transfer have made a sea change in the rural economy.”

According to him, rural housing is another area where the success is phenomenal, it has also pushed up job creation.

According to the rural development ministry, 1.07 crore rural houses were constructed over the last four years. Banumurthy said the significant aspect of this programme is that it has created huge amount of jobs in the rural areas.

A NIPFP study concludes that average time for house construction under this programme was down to 114 days as against 314 days under the erstwhile Indira Awaas Yojana indicating more jobs had been created now.

Also, road construction per day has increased three times now indicating more jobs now.

Madan Sabnavis, chief economist of Care Ratings, said it is true that back series data showed that UPA did better than NDA on growth numbers. “But these are not final figures and that it has to be take with a pinch of salt as the items included in previous series and present series are not the same,” he said.

“If you compare UPA 1 with NDA 1, perhaps UPA did better. And if UPA 2 is compared with Modi government, then NDA is doing better,” he added.

Economist Surjit Bhalla, who is a member of Prime Minister’s Economic Advisory Council, argues that going by the back series, inflation was higher during the UPA government. “Also Trade, Hotels, Transport and Communications sectors did better during NDA and it this is properly factored in manufacturing share then perhaps GDP growth during UPA was lower. However, more research will have to be done on this.”

Banumurthy did not subscribe to this view saying manufacturing share in GDP had grown to 18% during UPA period from 14% previously.

“What we have done is to generate the back series at the sub-sectoral level and then add up to get the aggregate series. The higher volatility/differences between old and new series at the sub-sectoral level, do not show up at the aggregate. Further, this is also due to reallocation of some of the economic activities between industrial and services sector in the new series. We are also superimposing these definitional changes (on which the new series is based) backwards, using a simple formula. Thus, the sectoral or disaggregated new series is comparable to the old series with this limitation, while at the aggregate level these definitional changes even out,” Bhanumurthy said.

Economist Arun Kumar said back series GDP is useful for technical purposes and it is being unnecessarily used to score political brownie points.

SKEWED

• Taking advantage of digitisation, the implementation of schemes has been far better 
   
• These are not final figures as the items included in previous series  and present series are not the same