ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Building Castles in the Air

With dodgy GDP numbers, what can one make of the government's annual scrutiny of the economy?

When a finance minister proves to be untrustworthy as regards the tax and non-tax revenues that he projects, the authenticity of the union budget, indeed, the very sanctity of the exercise must be held in doubt. But when the gross domestic product (GDP) numbers are dodgy, what then can one make of the annual official scrutiny of the economy, which is, anyway, never authentic, merely meant to boost investor confidence? Just last year, the GDP numbers pointed to stagnation in the manufacturing sector, but now the fresh numbers contradict all of that. What stagnation? There is nothing of the sort; according to the figures of gross value added at constant (2011–12) basic prices, growth of the manufacturing sector was quite robust, 6.2% in 2012–13, 5.3% in 2013–14, and 6.8% in 2014–15.

But, of course, the Modi effect: with the return of investor confidence, in expectation of huge capital gains, large net portfolio capital inflows have led to rising asset values, and these may possibly catalyse a debt-driven increase in private consumption. Not quite, but the new private final consumption expenditure numbers do point to rising growth rates, from 5.5% in 2012–13 to 6.2% in 2013–14, and from there to 7.1% in 2014–15. But then, the revival of government final consumption is definitely more impressive, from 1.7% in 2012–13 to 8.2% in 2013–14, and then to 10% in 2014–15.

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