New GDP Numbers Make Jaitley Happy

Indian economy is forecast to grow at an accelerated 7.4 percent in the fiscal year ending in March 2015 as against 6.9 percent in the previous fiscal, according to advance estimates released Monday. The high growth numbers, based on the new formula (with 2011-12 as the base year) adopted by India in conformity with the international norms, is good news for the NDA government which is set to present its first full budget on February 28.

At the current prices, India is expected to record 11.5 percent growth in the 2014-15 fiscal as against 13.7 percent in the previous fiscal, chief statistician Dr Ashish Kumar stated pointing out that the advance estimates are being released earlier this year as they are important for the budget making exercise and for fixing targets.

Refusing to draw parallels with China to state the India is emerging as the fastest growing economy, Dr Kumar states that it would be an unfair comparison considering China’s economy is several fold bigger than India.

"The size of China’s economy is three to four times bigger. It will take India 20-30 years to catch up with China," he stated at a press briefing. 

Besides, shifting the base year to 2011-12 from 2004-05 earlier, India now measures GDP by market prices instead of factor costs, to take into account gross value addition in goods and services as well as indirect taxes.

After the upwardly revised 8.2 percent growth at constant price in the second quarter, India’s growth slipped to 7.5 percent in the third quarter. At constant prices, CSO has also upwardly revised first quarter growth to 6.5 percent. 

Erratic monsoon during 2014 summer has had its impact with the agriculture, forestry and fishing sector expected to show a slower growth of 1.1 percent in terms of GAV at basic constant prices as against 3.7 percent in the previous fiscal, the new Central Statistical Office (CSO) data shows.

Industry wise the mining and quarrying; construction and manufacturing' is estimated to grow 2.3 percent, 4.5 percent and 6.8 percent, respectively. 

Financial services sector is expected to grow at 13.7 percent with the overall services sector slated to grow at 10.6 percent.

"The new data shows that recovery is happening and it being reflected in the stock market," says NR Bhanumurthy of National Institute of Public Finance and Policy.

"The better numbers reflect that the basic concept is more robust."

The corporate may or may not rejoice at the new numbers as while it reflects that growth is on course, the high numbers could ease the pressure on the Central Bank to further lower the interest rates.