31.1.15

A new base!


Fresh FY13 and FY14 data show recovery had started in the last year of UPA govt itself
India's economy expanded at a much quicker pace in 2013-14 than previously estimated, updated and revamped data with a new base showed, indicating that a recovery had started in the last year of UPA government and the country's growth could outpace China's this year itself. Gross domestic product grew 6.9% in 2013-14 and 5.1% in the year before that. The numbers aren't strictly comparable with the earlier data that showed the economy expanded 4.7% in fiscal 2014 and 4.5% in fiscal 2013.
The UPA had received much flak for the slow growth after years of nearly double-digit expansion.There will be greater pressure on the new government, which took over in May last year, to better the performance in the current fiscal year through March.
Apart from updating the base of national accounts to 2011-12 from 2004-05, the country has also shifted to compiling numbers at internationally accepted market prices as opposed to the previous factor-cost method, which considered cost of factors consumed for producing goods and services. In addition, coverage has become wider to include a bigger set of numbers from the corporate affairs ministry's database and more of the unorganised sectors.
In terms of the size, the economy remains the same at nearly Rs.113.5 lakh crore in fiscal 2014, which suggests some growth redistribution is behind the spurt in growth from earlier estimate. Based on the new formula, 2011-12 growth could be lower than the previously estimated 6.7%.
Former finance minister P Chidambaram said this should put to an end the “misconceived“ charge that the UPA government mismanaged the economy. “I sincerely hope that the government's leaders will stop repeating the jibe of sub-5% growth in the last two years,“ he said, offering to work with the government to take the country forward. “There is much work to be done.We are willing to help. It is up to the government to reach out to everyone, build consensus, and work toward achieving higher growth in the years to come,“ he added. There is something in the revision for the new government as well, as the new formula could push up growth for the current fiscal year to more than 7%. According to International Monetary Fund estimates, China's growth is expected to slow to 6.8% in 2015 from the estimated 7.4% in 2014. The IMF has recently predicted India's GDP growth to surpass that of China in 2016.
Based on earlier factor cost method, the revised numbers showed the economy grew 6.6% in FY14 and 4.9% in FY13, the last two years of the UPA government.
The revised numbers showed that investments picked up slightly in the last year of Manmohan Singh government with gross fixed capital formation rising 3% in fiscal 2014 from a 0.3% decline in the previous year. Consumer demand, as measured by the private final consumption expenditure, recovered to 6.2% from 5.5% over this period.
The shift in the conceptual framework for national accounts means that a number of indicators where GDP is used as reference point will change. Public expenditure, fiscal deficit and savings will be adjusted for a change in the GDP numbers, but the government said the revision is not material.
“It may be noted that the level of revision in the present base revision is not large enough to affect any of these ratios significantly,“ the statistics office said in a statement.
Gross savings have declined steadily from 33% of gross national disposable income in fiscal 2012 to 30% in fiscal 2014. The manufacturing sector performed much better than earlier estimated in 2013-14, showing growth of 5.3% against a 0.7% contraction estimated in the earlier series. The share of manufacturing in the overall economy went up to 17.3% in 2013-14 as per the new series as against 12.9% in the earlier.
This is essentially on account of the new corporate database that will supplement the information available in the annual survey of industries. The government is targeting to take up the manufacturing share to 25% by 2022, with the ‘Make in India’ campaign.
The services sector, excluding construction, which has enjoyed a share of close to 57% in the earlier series, is down to 51.3% in the 2011-12 series. The share of trade and repair services has fallen to 12% from 16.5%. Financial services have been widened to include accounts of stock brokers, stock exchanges, asset management companies, mutual funds, pension funds and regulatory bodies like the Securities and Exchange Board of India, Pension Fund Regulatory and Development Authority and Insurance Regulatory and Development Authority.
Mining and quarrying recorded growth of 5.4% in 2013-14 on the new series as against a 1.4% contraction recorded previously.
The statistics office has included a new asset classification – Intellectual property products, comprising research and development, mineral exploration, database and software, etc.

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