 "Can't talk about recovery until Jan IIP data comes: Pronab Sen")
Manufacturing grew just 0.7 per cent in the first nine months of FY13. In advance estimates of GDP, manufacturing growth is estimated at 1.9 per cent for the financial year. Are we looking at even further low GDP growth than the 5 per cent estimated by the Central Statistics Office (CSO)?
Manufacturing in the IIP data shows the entire value-added chain. In GDP data, it shows net value addition. It is not one-to-one relation between GDP data and IIP. What the finance ministry is saying is, after November, a large numbers of measures were taken and some implemented as well. So, it expects turnaround in December and January, which it says has not been taken into account by CSO. By definition, CSO has actual data up to November and makes projections thereafter. We don’t know whether there is an uptick in January until actual data for the month comes.
What are the chances of growth to be higher than CSO estimates, given the fact that IIP contracted 0.6 per cent in December?
All of it is in an area of guesswork at the moment. Unless January IIP data also comes, these remain guesses. Having said that, one point should be noted. IIP data does not capture small scale industries (SSIs). It is in the corporate sector that we have been witnessing a slowdown and not in SSIs. Activities of SSIs would be captured in the Annual Survey of Industries (which will come by December 2013). As such, even the first actual data on GDP growth for 2012-13 in May will not capture these numbers. It will only be in the GDP numbers that come out in January 2014 when SSIs activities will be captured.
Besides manufacturing, mining contracted four per cent in December. The base was also not high, since there was a contraction in December 2012 as well. Is mining still a problematic area?
Yes. The K-G gas fields are going through problems. Its production halved in a period of two years. Coal has also been witnessing a flat growth.
Electricity grew 5.2 per cent in December, though less than 9.2 per cent a year ago. Has the sector resolved its problems?
Yes, in a sense, if you look at growth. However, 60,000 Mw capacity is stuck due to coal linkages. Had that problem been resolved, the growth would have been higher.
Why do you think both consumer durables and consumer non-durable goods production declined in December, the first such instance in this financial year?
There is no denying that the economy has been slowing. Income distribution towards the high consuming class has also plateaued. Basically, terms of trade had started improving in favour of agriculture since 2006 and, in that sense, redistribution of income happened. Then, the Mahatma Gandhi National Rural Employment Guarantee Scheme had raised wages of people in rural areas. Basically, there was a shift in income towards those classes where marginal propensity to consume is more. This seems to have peaked.