Cribbing apart, GDP growth numbers good
There has been a great deal of criticism from opposition parties on the new growth figures that the Central Statistics Office (CSO) has put out. The CSO data showed that the GDP growth was at seven per cent during October-December 2016 — the period when the immediate impact of demonetisation was at its peak. The Opposition's response is understandable: It was anticipating a much lower number with which it could beat the Government with. After all, former Prime Minister and Congress leader, Manmohan Singh, himself an economist, had predicted a really sharp drop in the GDP growth figures. Others too in the opposition camp as well as the sceptics outside had spoken of similar doomsday eventuality. The CSO also said that the economy is expected to grow at 7.1 per cent this fiscal year, which is only marginally lower than the previous quarter of 7.4 per cent and will be below the 7.9 per cent of 2015-16. Both the Reserve Bank of India and the World Bank have cut growth estimates in the wake of the demonetisation decision but were also quick to add that the disruption in the growth would be only temporary. Indeed, most global investment and banking firms have gone on record to say that the demonetisation impact, while sizeable, would not be catastrophic. A Capital Economics Report has pointed out that economic activity had already begun to rebound after being hit by demonetisation. These are the precise sentiments the Government had been emphasising on since the demonetisation drive. And yet, opposition parties, primarily the left, the Congress and the Trinamool Congress, have been seeking to put the Government on the mat on the issue. They have particularly targeted Prime Minister Narendra Modi, with Manmohan Singh going to the extent of calling the decision, an “organised loot”. Others have gone further, insinuating that the BJP and the Prime Minister had ‘benefitted' from demonetisation. To an extent, they are right. The party and the Prime Minister have indeed gained — witness the string of victories in local body elections in various States. With the third quarter results showing buoyancy, one should expect that the fourth and last quarter of the current fiscal will be as cheerful.
There are some reasons for worry, though, and the Government must take care of those areas. Growth in eight core sectors has slowed down to a five-month low of 3.4 per cent in January. That, according to experts, has been primarily due to output contraction in cement, refineries and fertiliser. The Government's recent push in infrastructure, farming and housing sectors should help these core areas to pep up in the months to come. Meanwhile, sceptics are wondering as to where the decent growth percentage has come from, given that industries almost across the board were reporting steep declines in sales and consumers grappling with shortage of hard currency. They are asking how the consumption demand grew at over 10 per cent during the third quarter when the demonetisation hammer had hit the nation the hardest. They have concluded that the CSO had failed to grasp the reality. Whatever the case may be, the CSO data cannot be all that wrong in terms of at least indicating a trend.