 "Critics have not internalised the concept of value addition: T C A Anant")
A faster decline in raw material costs compared to a fall in sales of corporate explains the double-digit manufacturing growth in the third quarter, says Chief Statistician T C A Anant. Amid constant scrutiny of the GDP numbers, he tells Dilasha Seth that people should try to understand the difference between sales and value-added to better comprehend the numbers. Edited excerpts:
How do we reconcile the double-digit manufacturing growth in the third quarter of FY16 with poor demand and investment in the economy?
There are two parts to it. One is that while at constant prices growth is 12.6 per cent, at current prices it is 10.9 per cent as Wholesale Price Index for manufacturing goods is in the negative territory. Now if we break the 10.9 per cent, corporate segment is based on the growth rates that we have seen in the advance filings made by companies and quasi-corporate by the Index of Industrial Production. Value-added at corporate level can be measured in two ways - earnings less intermediate costs or payments to wages and salaries, depreciation and profits. Earnings have been negative, wages and salaries positive, depreciation positive and profits also been positive. Here, even though sales have been negative, raw material cost in manufacturing declined faster than sales. A large number of analysts have noticed this.
We can say that. Gross value added at corporate level is growing fairly high at 12-13 per cent. And corporate are 60-65 per cent of total manufacturing value added. While the remainder grow along the IIP rates. So you come to 10.9 per cent.
But GDP data under the new series has come under constant scrutiny despite several rounds of explanations by CSO. What is the inherent issue according to you?
They say that it doesn't feel like a double-digit growth in manufacturing as sales growth is negative. It is a question of trying to understand the difference between what you are focusing on and value added. People have not internalised. The last 14 months or so have been very different from the previous 20 years. We have not had sustained long period negative price growth over the last two decades in major raw materials and manufactured products. WPI has been in negative territory for 14 months. How does it impact calculations and value added is something people should figure out from these calculations.
How do we reconcile the double-digit manufacturing growth in the third quarter of FY16 with poor demand and investment in the economy?
There are two parts to it. One is that while at constant prices growth is 12.6 per cent, at current prices it is 10.9 per cent as Wholesale Price Index for manufacturing goods is in the negative territory. Now if we break the 10.9 per cent, corporate segment is based on the growth rates that we have seen in the advance filings made by companies and quasi-corporate by the Index of Industrial Production. Value-added at corporate level can be measured in two ways - earnings less intermediate costs or payments to wages and salaries, depreciation and profits. Earnings have been negative, wages and salaries positive, depreciation positive and profits also been positive. Here, even though sales have been negative, raw material cost in manufacturing declined faster than sales. A large number of analysts have noticed this.
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So basically it is the corporate sector that essentially contributed to growth in Q3?
We can say that. Gross value added at corporate level is growing fairly high at 12-13 per cent. And corporate are 60-65 per cent of total manufacturing value added. While the remainder grow along the IIP rates. So you come to 10.9 per cent.
But GDP data under the new series has come under constant scrutiny despite several rounds of explanations by CSO. What is the inherent issue according to you?
They say that it doesn't feel like a double-digit growth in manufacturing as sales growth is negative. It is a question of trying to understand the difference between what you are focusing on and value added. People have not internalised. The last 14 months or so have been very different from the previous 20 years. We have not had sustained long period negative price growth over the last two decades in major raw materials and manufactured products. WPI has been in negative territory for 14 months. How does it impact calculations and value added is something people should figure out from these calculations.