Even as industrial recovery is underway, latest government data are not enough to prompt an exit from fiscal stimulus measures. According to Chief Statistician Pronab Sen, strong growth numbers do indicate that the government might start thinking about stimulus withdrawal, but the economic picture would be clear only around May, when the growth figures for the current financial year would be available.
“Even though industrial recovery is pretty much in place, the final call should be taken (considering) the demand side. All the data we have now only give information of the supply side and do not provide a clear picture of sustainable improvements on the demand side. Statistical basis for taking the final call will be much further down the lane,” said Sen.
Industry growth has started picking up in recent months and stood at 11.7 per cent for November, leading to expectations of a partial rollback of fiscal stimulus measures in the Budget, which is to be presented on February 26. This comes against the backdrop of the Reserve Bank of India’s (RBI’s) decision last week to start the process of monetary tightening by raising the cash reserve ratio by 75 basis points.
| ECONOMIC HEALTH-CHECK |
| * The economic picture would be clear by May, when the growth figures for the financial year would be available |
| * Industry growth has started picking up in recent months. It stood at 11.7% in November |
| * RBI last week started the process of monetary tightening by raising the cash reserve ratio 75 basis points |
| * The Ministry of Statistics and Programme Implementation has released the new series of national accounts that measures GDP with a revised base of 2004-05 |
| * Revision of base year provides a statistical advantage to the government as the fiscal deficit would come down to 6.4% of GDP, against a target of 6.7% |
Sen further added the decision to withdraw stimulus in the Budget might be a gamble. “It is up to the finance minister to either play safe (in the Budget) or wait for actual economic figures to come out or gamble and take a decision on industrial figures,” he added.
The Ministry of Statistics and Programme Implementation (MoSPI) also released the new series of national accounts which measure the gross domestic product (GDP) with a revised base of 2004-05 from an earlier base of 1999-2000. The revision of base has not resulted in significant changes in the growth rates since 2004-05, except in 2007-08 where the new estimates give a higher growth rate of 9.2 per cent (earlier 9 per cent).
With a revision of base year, the GDP at current prices for 2008-09 increases by 6 per cent to Rs 52,28,650 crore, compared to the old series estimate of Rs 49,33,183 crore. This provides a statistical advantage to the government as the fiscal deficit would come down to 6.4 per cent of GDP, against a target of 6.7 per cent set by the finance ministry for the current financial year.
