The latest GDP data >released by the Central Statistics Office (CSO) raise more questions than they answer. While on the face of it, the projection of 7.6 per cent growth at constant prices for the fiscal year ending March 31 sounds both attainable and impressive, a closer look at the other sets of numbers, including the third-quarter reading, raises some flags. The pace of economic expansion is estimated to have slowed to 7.3 per cent in the three months ended December, from 7.7 per cent (based on an upward revision) in the preceding quarter. Separately, the gross value added (GVA) growth projections for seven of the nine industry classifications for the full year show a slowdown from the comparable 12-month period, which is a second flag. The two industries where the CSO expects expansion in the current fiscal to outpace that of last year are agriculture and manufacturing. The ‘agriculture, forestry and fishing’ sector is estimated to expand 1.1 per cent in 2015-16 as against a 0.2 per cent contraction, and manufacturing is pencilled to post 9.5 per cent growth, from 5.5 per cent in 2014-15. This is where it gets more confusing. In its latest monetary policy review on February 2, the Reserve Bank of India cited “slackening agricultural and industrial growth” as a prime reason for a loss in economic momentum in the third quarter. With the CSO data showing a 1 per cent GVA contraction in agriculture in the period ended December and the RBI pointing to a decline in rabi sowing by end-January, it is hard to see where the farm sector will derive the necessary impetus from in the current quarter to help undergird overall growth.
As far as manufacturing goes, the >January purchasing managers’ index (PMI) expanded to a four-month high , partly helped by resumption of output at factories affected by the December floods. Still, the sustainability of this expansion could be undermined as the same PMI release also pointed to a drop in output and new orders for makers of investment goods. The weak overseas demand environment, reflected in the protracted exports slump, is also a dampener. The robust growth estimate brings us to a crucial related question: how reliable are the data as currently calculated, a >concern raised by several economists including RBI Governor Raghuram Rajan . He has cautioned against laying too much store by the numbers if they don’t adequately capture the net economic impact of an activity. For instance, under the new methodology indirect taxes are included and this is seen by some experts as inflating the overall figures, without necessarily resulting in increased output. The government has an opportunity later this month to address many of these concerns and clarify on both the data points and the rationale behind its methodology when it presents the annual Economic Survey. It is important that it dispels all doubts and enhances the credibility of official statistics at a time when India seeks its rightful place at the high table of the world economic order.