 "T C A Anant")
The gross domestic product (GDP) and gross value added (GVA) numbers in the first quarter of 2016-17 showed a slightly divergent picture of the economy. T C A Anant, the government's statistics chief (officially, chief statistician and also secretary in the statitics and programme implementation ministry) tells Dilasha Seth & Indivjal Dhasmana both numbers are needed to gauge the economy. Also, that construction and capital goods show they need to be addressed. Edited excerpts:
While GDP growth was at a five-quarter low in the first three months of FY17, that in GVA moderately increased from the first quarter of the previous year. And, GVA growth was higher than GDP's. How could this be explained?
The fundamental difference between GDP and GVA is net indirect taxes (indirect taxes minus subsidies). The growth in indirect taxes is not as high but that was expected. The major change is indeed in subsidies, which have shown growth of 53 per centin Q1 vis-a-vis a decline of 26 per cent in the same quarter last year. The first quarter saw announcement of over 40 per centof budgeted subsidies, resulting in the divergence. This has happened in the past, too. Both tax revenue and government expenditure are subject to administrative decisions. The annual figures reflect overall economic activity but the quarterly disbursal is, to some extent, administrative.
Should one look at GDP or GVA to assess the economy's current state? And, would you say there are signs of improvement?
We should look at both. GVA gives you actual activity in the production economy, while GDP gives you a sense of what has actually happened, as that is where the revenues and incomes that people get come from. Therefore, both are important. There are some signs of improvement, which is why GVA has gone up, despite some concerns which are known to everyone.
Do you expect the agriculture numbers to improve in the next quarter, with a good monsoon? Though, a prolonged monsoon can affect the construction sector.
The first quarter's agriculture estimates are the tail-end of two years of a poor monsoon. So, it was expected to be lower. Construction estimates coming in low can be attributed to various factors and one is the seasonal effect. The monsoon effect, if prolonged, will dampen the construction sector, which we also saw in Q1. Already, the monsoon effects in construction are there in Q2. There is the question of how much the improved rainfall improves rural economic activity and to what extent it increases rural demand. If both of these pick up, we will see corresponding effects in all other elements that constrain the economy. It is very hard to gauge the impact, unless you properly do an analysis by taking into account the distribution. We will get the first estimate for that only by the middle of September.
Broadly, are there areas of weakness persisting in the economy that require attention?
First, there continue to be signs of improvement in manufacturing. However, we can’t say that we are seeing all-round recovery, as elements of weakness are still visible. Both construction and capital goods show signs of weakness and they need to be addressed.
Gross fixed capital formation, a proxy for investment, declined by three per cent in the first quarter. How big a worry is the fact that it was mainly consumption that fuelled the economy and not investments?
The linkage between capital formation and continued robustness of growth is a little complicated. Capital formation creates capacity. Whether a decline in capital formation or not so rapid enough capital formation is a source of worry or not is dependent on whether we are capital constrained or not. That is a mixed picture. There are significant parts of the economy where there is evidence that we are still suffering from excess capacity. The question is whether we are still utilising the capacity created during the period of boom in 2010-11 or not.
