CII throws weight behind GDP figures

CII ASCON survey has revealed a significant improvement in performance in the Oct-Dec quarter

The Confederation of Indian Industry (CII) is in agreement with the gross domestic product (GDP) data for the third quarter, put out by the Central Statistics Office, even as critics have found loopholes in the figures because these supposedly do not bear out the impact of demonetisation.

CII Director General Chandrajit Banerjee has said the data are in line with the surveys by the chamber. 

The data showed that GDP grew 7 per cent in the third quarter against 7.4 per cent in the second quarter and 6.9 per cent in the October-December period of 2015. 

Critics were surprised at the data because they had thought that demonetisation had affected the economy much harder. "We don't see any reason to doubt the data since they are very much in line with what we have," Banerjee told Business Standard. 

Ahead of the second half of the Budget session of Parliament, the CII has demanded that the Budget provision of the long-term capital gains tax (LCGT) be applied with prospective effect and in case these are with retrospective effect inter-se transfers between promoter groups be exempted from it.

The CII ASCON survey, which tracks production growth trends across sectors, has revealed a significant improvement in performance in the October-December quarter. 

Of the 83 sectors covered, the number of sectors recording growth higher than 10 per cent has increased, while the number of sectors that recorded less than 10 per cent growth has declined.

Similarly, a CII study of a large sample of 2,130 companies shows that aggregate net sales of this group of companies have grown 6.5 per cent in the December quarter on a y-o-y basis. This is after a long period of declining sales. 

He said demonetisation had different effects on different segments. "There are sectors such as cement and two-wheelers that have been affected. In the case of passenger cars, there was a dip in December, followed by a sharp recovery in January. Domestic sales of tractors dipped in November but recovered in December and January. Steel was not affected and has been growing rapidly," he pointed out. 

He said it was hard to get an aggregate picture. 

"There are very little data on the informal sector. Given these constraints, the GDP data are in line with what we have seen," he said. 

On the 10 per cent LCGT proposed by the Budget on share sales where the securities transaction tax was not paid after 2004, Banerjee said though the intentions were good, certain genuine share purchases, done off-exchanges through ESOPs, even if sold on-exchange, were not eligible for exemption. A blanket denial of exemption might result in genuine hardships for honest taxpayers, he said.