Basically, it's booming!' JPMorgan CEO Jamie Dimon was responding to a question posed at the Economic Club of New York in late April on the resilience of the US economy. But he could as well have been talking of India. National Statistics Office (NSO) data released last Friday show the Indian economy is, well, booming.
At 8.2%, GDP growth for 2023-24 is streets ahead of the most optimistic estimates, and far, far ahead of RBI's estimate of 7% till as late as December 2023. Sure, there could be distortions due to the way the GDP deflator is computed, as this is then used to arrive at the real (from nominal) GDP numbers, and also because of changes in the 'net taxes' figure - GDP is GVA (gross value added) plus taxes less subsidies. But whichever way you dice the numbers - nominal or real GDP growth, GDP or GVA - there's no getting away from the fact that the Indian economy is shining.
The news has, of course, been greeted with 'ra-ras' from the ruling BJP and nitpicking by the Opposition, even as it has left the aam janta cold. This is for two reasons.
At best of times, NSO's quarterly releases on GDP - and opinion columns parsing them - don't grab too many eyeballs, as Oped writers well know. But when these estimates come just a day after the last day of campaigning for Lok Sabha elections, and a day before the last day of polls, nothing the NSO pulls out of its hat can possibly compete for attention with the cacophony of exit polls and suspense of waiting for the results now a day away.
After all, the outcome of elections will have a far greater bearing on the future trajectory of the economy - and its politics - than any inference one can draw from NSO's numbers.
With that caveat in mind, let me turn to the estimates. But instead of parsing them to see which sectors are growing, and at what rate, it might be better to look at them from the perspective of the challenges and opportunities they present to the new government. What, if anything, do these cheery numbers mean?
A great deal. The economy is, undoubtedly, on a strong wicket. Statistically speaking, the NSO's second advance estimate of 7.6% growth made in February implied a 5.7% expansion in the Jan-March quarter, after taking into account growth numbers for the first three quarters of FY24 (8.2%, 8.1% and 8.4% respectively). What we got, instead, was an eye-popping 7.8%, powering annual growth to higher-than-anticipated 8.2%.
For starters, the new government will be able to steer the economy without having to worry unduly about the biggest bogey of all in public finance: fiscal deficit. As against GoI's RE of 5.8% in the interim budget presented in February, FY24 is likely to end with a lower deficit of 5.6%, making BE of 5.1% for the current fiscal seem well within reach.
For another, higher GDP numbers bode well for tax collections, especially when numbers suggest the manufacturing sector is finally looking up. At 9.9%, full-year manufacturing growth is way above the 2.2% contraction seen in 2022-23.
Given that manufacturing, along with trade, hotels, transport and communications, as well as construction, which grew at 6.4% and 9.9% respectively, are the three sectors that contribute most to employment, we can hope that we've turned the corner, with jobless growth giving way to growth and jobs.
Does this mean everything is hunky-dory? Not quite. Remember, disaggregated data show the farm sector - where large numbers continue to be engaged, and contributes close to 15% of GDP - is still struggling. Sure, growth has turned marginally positive (0.6%) in Q4, after contracting for two consecutive quarters. But annual growth at 1.4% is the lowest among all sectors, and is way below the decadal average of over 4%. This explains why private consumption has grown at a glacial pace of little over 3% for the past many quarters, and also has huge implications for welfare.
Also, at the end of the day, NSO data only tells you how the economy has performed in the past. For the future, we will have to look to high-frequency indicators. By that count, India's economy seems to have got off to a flying start in 2024-25. According to the Economic Activity Index (EAI), constructed by extracting the common trend underlying 26 high-frequency indicators of economic activity in RBI's May bulletin, activity rebounded in April.
Of course, geopolitical tensions and volatile global commodity prices, especially of petro products, as well as an erratic monsoon and resurgence of inflation, could play spoiler. But, for now, we are on a good wicket.
That's welcome news for any new government. And if the incumbent government is voted back, a vindication that its economic policies are on the right track.
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The news has, of course, been greeted with 'ra-ras' from the ruling BJP and nitpicking by the Opposition, even as it has left the aam janta cold. This is for two reasons.
At best of times, NSO's quarterly releases on GDP - and opinion columns parsing them - don't grab too many eyeballs, as Oped writers well know. But when these estimates come just a day after the last day of campaigning for Lok Sabha elections, and a day before the last day of polls, nothing the NSO pulls out of its hat can possibly compete for attention with the cacophony of exit polls and suspense of waiting for the results now a day away.
After all, the outcome of elections will have a far greater bearing on the future trajectory of the economy - and its politics - than any inference one can draw from NSO's numbers.
With that caveat in mind, let me turn to the estimates. But instead of parsing them to see which sectors are growing, and at what rate, it might be better to look at them from the perspective of the challenges and opportunities they present to the new government. What, if anything, do these cheery numbers mean?
A great deal. The economy is, undoubtedly, on a strong wicket. Statistically speaking, the NSO's second advance estimate of 7.6% growth made in February implied a 5.7% expansion in the Jan-March quarter, after taking into account growth numbers for the first three quarters of FY24 (8.2%, 8.1% and 8.4% respectively). What we got, instead, was an eye-popping 7.8%, powering annual growth to higher-than-anticipated 8.2%.
For starters, the new government will be able to steer the economy without having to worry unduly about the biggest bogey of all in public finance: fiscal deficit. As against GoI's RE of 5.8% in the interim budget presented in February, FY24 is likely to end with a lower deficit of 5.6%, making BE of 5.1% for the current fiscal seem well within reach.
For another, higher GDP numbers bode well for tax collections, especially when numbers suggest the manufacturing sector is finally looking up. At 9.9%, full-year manufacturing growth is way above the 2.2% contraction seen in 2022-23.
Given that manufacturing, along with trade, hotels, transport and communications, as well as construction, which grew at 6.4% and 9.9% respectively, are the three sectors that contribute most to employment, we can hope that we've turned the corner, with jobless growth giving way to growth and jobs.
Does this mean everything is hunky-dory? Not quite. Remember, disaggregated data show the farm sector - where large numbers continue to be engaged, and contributes close to 15% of GDP - is still struggling. Sure, growth has turned marginally positive (0.6%) in Q4, after contracting for two consecutive quarters. But annual growth at 1.4% is the lowest among all sectors, and is way below the decadal average of over 4%. This explains why private consumption has grown at a glacial pace of little over 3% for the past many quarters, and also has huge implications for welfare.
Also, at the end of the day, NSO data only tells you how the economy has performed in the past. For the future, we will have to look to high-frequency indicators. By that count, India's economy seems to have got off to a flying start in 2024-25. According to the Economic Activity Index (EAI), constructed by extracting the common trend underlying 26 high-frequency indicators of economic activity in RBI's May bulletin, activity rebounded in April.
Of course, geopolitical tensions and volatile global commodity prices, especially of petro products, as well as an erratic monsoon and resurgence of inflation, could play spoiler. But, for now, we are on a good wicket.
That's welcome news for any new government. And if the incumbent government is voted back, a vindication that its economic policies are on the right track.
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