Backdated GDP series and future growth -Ashima Goyal
-The Hindu Business Line
The new series data cannot really be faulted. But it is important not to repeat the policy mistakes that hit industrial growth
The 2011-12 base backdated GDP series led to much discussion. The reduction in past growth rates gave them a political colour. It is unfortunate if the independence of the CSO and associated experts is questioned just because of this coincidence. A rebasing that uses much richer datasets and aligns with international concepts must be welcomed.
Although many cynics would deny it, our institutions have become stronger and more expert driven as part of the maturing of the economy, improving the credibility of policy processes. Moreover, the 2011-12 figures give a jolt to both governments.
Growth rates in the UPA regime have fallen, but the sharp fall in growth after 2014-15 points towards adverse effects of some policy choices made by the current regime.
Stagnation in industry
Interesting implications for Indian growth can be drawn from the extended consistent series. First, the slowdown in growth pre- and post-2011 continues, although now it is milder. But the fall is very sharp in industry, where the pre- and post-2011 rates are 9 per cent and 6 per cent, respectively.
Industry has the maximum share in investment, which has been slow ever since 2011. There was a brief rise in 2014 but it collapsed again in 2015-16. After this long stagnation some supply side constraints must be appearing, so the current revival will not be a flashy infrastructure-led growth cycle but a slow, steady bottom-driven capacity expansion. To that extent it may be sustainable and imply the manufacturing upturn is robust.
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