Centre gung-ho on India being fastest growing economy at 7.7%, but GDP growth feared to be not that good

The central government might be gung-ho on India becoming the fastest growing economy at 7.7% in January-March quarter of 2018, but the GDP growth is feared to be not that good when non-corporate data comes out by this year-end or early next year.

“Well, the claim of fastest growing economy, we have to take with a pinch of salt,” India’s former chief statistician and national statistical commission chairman, Pronab Sen told DNA Money in a wide-ranging interview.
The over 7% growth is based on corporate sector data, where in companies are registered under the companies act. They form only 55% of the economic activity.

For non-corporate sector, which accounts for 27% of the economy activity, the figures will come by this year-end or early next year. These figures are available only once in five years and evidences so far indicate that this sector has not been doing well, particularly after demonetisation and rollout of GST.

Non-corporate sector includes partnership companies, MSMEs and informal activities. “We have no idea so far about the performance of non-corporate sector,’ Sen said indicating the GDP figures might have to be revised downwards, when the real picture of non-corproate sector is available.

The GDP calculated at the moment is through extrapolation of the performance of corporate sector to reflect non-corporate as well.

Going forward, the global scenario might result in a slowdown of India’s economic growth and Crisil in its recent report has painted a gloomy picture for the Indian economy.

Trade war, rising oil prices, widening trade deficit, surging inflation posed risks to the economy this year. Most of macro-ecnomic parameters have seen some strain lately and these are worrying signs. Nomura has already lowered growth to 7.2% from 7.4% this year.

Reserve Bank in its monetary policy on Wednesday too flagged off certain concerns on GDP growth going forward.
There could be some slowdown in growth rate in second half of this fiscal, even though it retained its earlier forecast of 7.4% growth for the entire 2018-19

Sen said private investment in India is still substantial because of the corporate sector. Private investment at 30% is “still good” by any standards.

But, unfortunately, a lot of this private investment is happening in upgradation, automation and sophisticated technology acquisition, which is not good for job creation and in many cases will result in job reduction. Most of the labour-intensive and job creating industries are in non-corporate sector, whose date is not available at the moment, Sen said.

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The fact that household investments have fallen indicate that non-corporate sector is not doing well, Sen said adding after demonetisation and rollout of GST, the drop in household investments is more pronounced.

Source: DNA Money