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India's gross domestic product (GDP) grew 7.3 per cent in 2014-15, slightly less than the advance estimate of 7.4 per cent. Advisors in the North Block tried to downplay the moderated numbers, saying the 0.1 percentage point lower growth could be due to a statistical error.
The growth is based on a new methodology of calculating GDP, with 2011-12 as the base year, against 2004-05 used earlier. According to this methodology, the economy expanded 6.9 per cent in 2013-14 and 5.1 per cent in 2012-13.
India’s growth in 2014-15 was a tad lower than China’s 7.4 per cent (for 2014). At 7.5 per cent, India’s growth in the quarter ended March this year, however, was higher than China’s seven per cent. The growth in the March quarter was in line with the advance estimates and the highest among large economies.
Data for the previous quarters, released by the Central Statistics Office on Friday, saw major revisions. GDP growth for the first quarter stood at 6.7 per cent, against the earlier estimate of 6.5 per cent; growth for the second quarter was revised to 8.4 per cent from 8.2 per cent. GDP growth for the third quarter, earlier estimated at 7.5 per cent, was revised to 6.6 per cent.
As such, economic growth in the second half of the year slowed to seven per cent from 7.6 per cent in the first.
In 2014-15, agriculture and allied sectors registered growth of only 0.2 per cent, against the advance estimate of 1.1 per cent, owing to a sub-normal monsoon and unseasonal rain. Agriculture had recorded 3.7 per cent growth in 2013-14. In the third and fourth quarters, farm sector production fell 1.1 per cent and 1.4 per cent, respectively.
Finance Minister Arun Jaitley said, “Agriculture and exports are two sectors of concern.” In April, merchandise exports contracted for a fifth consecutive month.
Chief Economic Advisor Arvind Subramanian said higher farm output would have lifted overall economic growth. “GDP growth lower by 0.1 per cent (compared to the advance estimate) could be a statistical error,” he said.
Contrary to expectations, growth in industrial projection was better than projected in the advance estimates. It stood at 4.8 per cent, against the estimate of 4.5 per cent. The manufacturing segment grew 7.1 per cent in 2014-15, against the advance estimate of 6.8 per cent.
It is felt this might lead to criticism of the data, as many would claim the ground reality doesn’t mirror the uptrend shown by the numbers. For 2013-14, the manufacturing segment expanded 5.3 per cent.
If one analyses industrial performance in value terms, there isn’t much of an upsurge. The Index of Industrial Production (IIP) rose 2.1 per cent in 2014-15, against contraction of 0.5 per cent the previous year. Within that, manufacturing grew 2.2 per cent, against contraction of 1.3 per cent the previous year.
“None of these value-added data is in sync with the physical data,” said CARE Ratings chief economist Madan Sabnavis.
Deloitte India senior director Anis Chakravarty said industry numbers continued to be overstated, in line with the gross value-add mechanism of computation showing wide variation from the IIP data. “Manufacturing has looked up, likely as a result of lower input costs and a fall in global commodity prices,” he said.
Jaitley said the revenue mop-up in April indicated a pick-up in manufacturing. Indirect tax collections rose 46 per cent year-on-year in April; excise duty collections rose about 100 per cent.
Finance Secretary Rajiv Mehrishi said higher growth in manufacturing sector showed jobs were being created.
In 2014-15, the services sector expanded 10.1 per cent, compared with the advanced estimate of 10.6 per cent. This was the first time this segment recorded double-digit growth since the new series was launched.
Growth for various segments within the services sector was revised. Broadly, the trade, hotels and communication segment expanded more than expected, while growth in the financial sector was slower. Growth in government expenditure on public administration, defence and other services fell, enabling the government to cut its fiscal deficit to four per cent of GDP from the revised estimate of 4.1 per cent.
The finance ministry said sectors dependent on policy — manufacturing and services — saw substantial improvement, while those relying on other factors, such as agriculture and exports, didn’t fare as well.
Those looking for definite signs of a pick-up in investment might have to wait, though gross capital fixed formation, a proxy for investment, rose 4.6 per cent in 2014-15, compared with the advanced estimate of 4.1 per cent and three per cent in 2013-14.
Private final consumption expenditure, which indicates demand in the economy, rose 6.3 per cent, against the advance estimate of 7.1 per cent and 6.2 per cent in 2013-14.
Subdued demand is seen as coming in the way of investment. Though the data released on Friday did not give a break-up in terms of the urban and rural segments, it is expected low demand in rural areas has led to a slump in overall demand.
The government expects the economy to grow 8.1-8.5 per cent in 2015-16. While Sabnavis pegged it at 7.8-8 per cent, YES Bank chief economist Shubhada Rao projected it at 7.8-8.1 per cent.
