The Congress on Wednesday labelled the GDP numbers put out by the government as “highly suspect” and said they could dent India’s global credibility. Finance Minister Arun Jaitley, however, defended the numbers, saying that they belied the claims that demonetisation would have a strong adverse effect on the economy.
Accusing Prime Minister Narendra Modi and Union Finance Minister Arun Jaitley of “misleading” the public, Congress spokesperson Anand Sharma said the GDP numbers released by the Central Statistics Office (CSO) have not factored in the adverse impact of demonetisation, including losses in jobs and production.
The government should address the real problems and stop its ‘propagandists’ from ‘premature celebrations and misplaced euphoria’, Mr. Sharma said.
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He charged that the PM and the Finance Minister “remain in denial to further their narrow political agenda for short-term benefits and are not addressing the real issues.”
However, Mr. Jaitley on Wednesday said the GDP figures released by the CSO on Tuesday which showed that the economy grew at a relatively strong 7% in the third quarter of the financial year, had taken the effect of demonetisation into account.
“Third quarter was substantially impacted by demonetisation. It admittedly had led to a squeeze of currency,” Mr. Jaitley told reporters. “The GDP number belies exaggerated claims by many that the rural sector was in distress and shows that agriculture growth was at a record high.”
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“Remonetisation is up substantially, and its combination with economic resilience has shown some signs of a return of growth,” Mr Jaitley said. “Therefore I do expect that in the future quarters, this figure itself will grow further.”
The CSO said in its second advance estimates that the full-year’s GDP growth rate would remain unchanged at 7.1% from its earlier estimate made in January.
Within the Q3 numbers, the manufacturing sector grew 8.3%, faster than the 6.9% registered in Q2. The agriculture sector witnessed a growth of 6% in Q3 compared with 3.8% in Q2.
At the same time, even the mining and quarrying sector saw a rebound, with growth accelerating to 7.5% from a contraction of 1.3% in Q2.
What is surprising, according to economists, was that private final consumption expenditure (PFCE), a proxy for private spending, was shown to have grown far faster in Q3 (which included the months immediately following demonetisation) than was estimated for the entire year. While PFCE witnessed a growth rate of 10% in Q3, the CSO estimates a growth rate of 7.2% for the full year.
Speaking in Delhi following his return from a five-day trip to the U.K., Mr. Jaitley also said that “both the government and private sector investors in the U.K. are extremely buoyant as far as India is concerned.”