In terms of real Gross Value Added, that is, GVA at constant (2011-12) prices, there has been a growth of 7.1 per cent in 2014-15, as against a growth of 6.3 per cent in 2013-14, according to the statement.
RBI Governor Raghuram Rajan had on Thursday warned that we should be careful about how we measure growth. People are shifting between activities, he said, but it is important that when they shift to a new area, they are creating value.
The overall consensus seems to be that, despite the confusion in the national accounts caused by the revised methodology of computing GDP and GVA, there does not seem to be any other option but to use them.
“Raghuram Rajan has said that you should be careful about the GDP numbers. But these are the official numbers, and you need them as a benchmark,” M Govinda Rao, Professor Emeritus at the National Institute of Public Finance and Policy, told The Hindu.
The buoyancy of the indirect tax numbers have also helped, added Mr Rao.
“Around 80 per cent of economists feel that the way the new GDP numbers are being calculated has yielded in a higher estimate than reality. The belief is that the economy is actually growing at 5-6 per cent,” Ashok Gulati, Infosys Chair Professor at the Indian Council for Research on International Economic Relations said, adding that there was no deliberate attempt to fudge the numbers. The problem lies with the methodology.
The problems with the GDP data come when they are analysed on a sectoral basis and also when they are compared to the other indicators of economic performance.
“If you look at all the other indices, growth in capital stock, exports, agriculture, industrial production, etc, then this (the GDP growth rate) will reconcile with none of them. There needs to be an external committee than can audit these numbers and bring credibility back to the government’s numbers,” said Rajiv Kumar, senior fellow at the Centre for Policy Research.
High-employment sectors such as agriculture are growing very slowly, adding to the concerns. The revised numbers peg the agricultural GVA at 1.3 per cent in 2014-15, up from the 0.6 per cent provisionally estimated earlier. The secondary sector, comprising manufacturing and construction, grew at 5.4 per cent in the same period, down from the estimated 6.5 per cent. The services sector grew at a robust 10.3 per cent.
“What each sector is saying is important. More than 50 per cent of the workforce is employed in agriculture, but the sector is growing at less than 2 per cent. Now, you can say that there was a drought, but it is the job of government policy to deal with such situations,” Mr Gulati said.
Gross Capital Formation, a proxy for economic activity, decreased marginally from 36.2 per cent of GDP in 2013-14 to 35.9 per cent in 2014-15.
“At constant (2011-12) prices, the private final consumption expenditure [a measure of individual spending capacity and inclination] is estimated as Rs. 55.20 lakh crore and Rs. 58.64 lakh crore, respectively for the years 2013-14 and 2014-15. The corresponding rates of PFCE to GDP for the years 2013-14 and 2014-15 are 56.1 per cent and 55.6 per cent respectively,” according to the ministry statement.
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