The government on Thursday lowered its measure for growth in Gross Domestic Product (GDP) to 6.2 per cent for 2011-12 from the 6.5 per cent estimated earlier. Growth in gross capital formation declined sharply to 0.5 per cent in 2011-12 from 15.2 per cent a year earlier, it said.
Nor will the lower GDP growth of 2011-12 raise the rate of rise for the current financial year, advance data on which will come out next week. This is so because GDP at constant prices, exclusive of indirect taxes, rose to Rs 52.4 lakh crore during 2011-12 from the Rs 52 lakh crore estimated earlier. Soumya Kanti Ghosh, chief economist, Federation of Indian Chambers of Commerce and Industry said if the Reserve Bank of India’s projections of 5.5 per cent of GDP growth for 2012-13 is taken as assumed on the earlier base of GDP for 2011-12, the revised base will yield GDP growth of just 5.1 per cent.
Even so, GDP growth came down in 2011-12 because the economic expansion in 2010-11 was sharply revised upwards by 0.9 percentage points, to 9.3 per cent from the 8.4 per cent calculated earlier, official figures released by the ministry of statistics and programme implementation (MoSPI) showed. This prompted economists to cast doubts on quality of data.
"This is surprising. Earlier, it was WPI (the wholesale price index), IIP (the index of industrial production) and now GDP. The sharp revision by 0.9 percentage points when nothing substantially changed means the quality of data is not as good," said CARE Ratings’ chief economist Madan Sabnavis. “It also meant that from a policy perspective, we were barking up a wrong tree.”
For example, as things stand now, the economy grew 8.02 per cent a year on an average in the 11th five-year Plan period (2007-08 to 2011-12) from the 7.86 per cent estimated earlier. The 12th Plan (2012-13 to 2016-17) looks at average GDP growth a year of eight per cent, which means less than the 11th plan. Earlier, it was slightly up from the latter.
The matter of comfort on 2010-11 is that it would be the first time after nine per cent growth for three consecutive years was broken by the global financial crisis of 2008-09 that the economy again grew a little over nine per cent. The mark is a psychological booster in that often the issue has been raised as to when the economy would revert to nine per cent annual growth.
However, even the new data shows it was not sustained for even the next year.
The surprising thing is that the economy grew sharply in 2010-11 despite the higher base of 8.6 per cent in 2009-10 against the 8.4 per cent estimated earlier.
Most economists were puzzled but MoSPI officials say the provisional data on GDP is just an indicator. The first revised data is based on actual numbers, as many figures like the annual survey of industries come later. Deloitte India’s senior director, Anis Chakravarty, said it was a lag between provisional data and revised data which led to a variation. In advanced countries, he said, data is revised but not so sharply.
Sectorally as well, there was sharp variation in the figures. The GDP growth rate was revised downwards for 2011-12 because the largest component of the services sector saw growth plummeting. In 2011-12, this segment—trade, hotels, transport and communication—grew just 6.2 per cent against the 11.2 per cent estimated earlier.
As growth of gross capital formation in the country declined, its percentage to GDP also came down sharply, to 35 per cent in 2011-12 from 36.8 per cent in 2010-11. The domestic savings rate also declined sharply to 30.8 per cent of GDP in 2011-12 from 34 per cent a year earlier.
