By Seetha
Just about a year back, the government's economic managers came down like a tonne of bricks on the Central Statistics Office (CSO) for allegedly projecting a lower growth figure. The CSO, in its advance estimates of gross domestic product (GDP) for 2012-13 released on 7 February 2013, had pegged growth at 5 percent. This was lower than several other estimates of growth, including that of the Reserve Bank of India, which expected a 5.5 percent growth.
The finance ministry was understandably upset – it had been predicting a 5.7-5.9 percent growth - and made no secret of it.
"These are only advance estimates," it scoffed in a press release issued that very day.
The CSO's projection, it argued, was based on an extrapolation of numbers till November 2012 and that there had been several positive signs after that.
Planning Commission Deputy Chairman Montek Singh Ahluwalia also jumped into the fray, saying he was not certain if the CSO had done its projections right.
Do the revised numbers favour the UPA? PTI
One year later, the CSO has indeed revised its 2012-13 growth figure. Only it is downward and not upward. GDP growth for 2012-13 is now officially 4.5 per cent.
These figures are not being rebutted or questioned this time around. Dare one suggest, then, that this figure actually suits the government? A lower base in 2012-13 could give growth in 2013-14 a chance of touching 5 percent, which the government is desperate to achieve and which seems completely elusive as of now. When growth moves from 4.5 percent to 5 percent, the government can piously claim it has nursed the economy back to health and put it on the path of recovery, deflecting criticism that it put the economy in the ICU in the first place.
The CSO-finance ministry spat notwithstanding, there is a nagging feeling that the various revisions in the growth figures seem to be designed to help the government present a rosier picture than is actually the case.
Take the case of the upward revision of the nominal GDP from Rs 10,020,620 crores to Rs 10,113,281 crores, which shows up the fiscal deficit for 2012-13 in a better light. Based on the revised estimates in the budget papers, the fiscal deficit in 2012-13 comes down to 5.1 per cent of GDP, against the 5.2 per cent estimated earlier (which was based on a lower nominal GDP). And when one looks at the final figure on fiscal deficit as put out by the Controller General of Accounts (Rs 489,890 crore), the fiscal deficit comes down to 4.8 percent (when calculated in terms of the revised nominal GDP).
Perhaps this is too dark a conspiracy theory. But the swings in the various revisions in numbers between the various levels of estimates do raise doubts. After the advance estimates of growth in a particular year, estimates go through four revisions – a provisional estimate, first, second and third revision. In the case of 2010-11, while the advance estimates predicted 8.6 percent growth, the first two revisions lowered it and the second revision took it to 9.3 percent. The final revision, however, brings it down to 8.9 percent.
Similarly, growth in 2011-12 has moved up and down from 6.9 percent to 6.7 percent at the time of the second revision. Economists are surprised at the fluctuations in estimates; there should be a clear pattern, some say. If the CSO isn't helping the government with convenient figures, then it is perhaps doing a pretty bad job with income statistics.
But why do such conspiracy theories gain ground? The answer is clear – because there is little to show that the government is on the ball when it comes to economic management. The latest figures show that under UPA-II, the economy has been going into a steady decline. The government returned to power after a bad year – growth in 2008-09 suffered because of the global financial crisis.
It appeared to start off well, getting growth back to 8.6 percent and then 8.9 percent. But after that it seems to have lost the plot, with growth slumping to 6.7 percent and then 4.5 per cent. The savings rate is down to 30.1 percent, the lowest in the last nine years, according to the State Bank of India's Ecowrap release. The investment rate has been declining since 2009-10, a sign of complete lack of confidence on the part of industry.
And there is little to indicate that things are improving in 2013-14.
GDP growth in the first half of 2013-14 has been a subdued 4.6 percent. The infrastructure sectors grew only 2.1 percent in April-December 2013-14 as against 6.7 percent in April-December 2012-13.
Public finances are also in bad shape, with the government having run up a fiscal deficit that is 95 percent of its budget target in the first nine months of the financial year itself. The only way it can avoid breaching the 4.8 percent fiscal deficit target is to massively compress expenditure. As the latest move on increasing the number of subsidised LPG cylinders shows, the government is not going to cut down on unproductive spending on misdirected subsidies. Instead, productive expenditure will take a hit. As always the growth in non-plan expenditure is higher than on plan expenditure and, within that, spending on the revenue account is higher than on the capital account.
The advance estimates for 2013-14 will be out in a week. That will throw some pointers at how close to reality the government's desire for a 5 per cent growth rate is. Watch this space.
via Business - Google News http://ift.tt/1ktKYvG
Put the internet to work for you.
0 comments:
Post a Comment