The economy may have grown at just 4.4 per cent in the first quarter of 2013-14 but Pronab Sen,chairman of the National Statistical Council said that the more worrying aspect is that GDP at market prices grew below 3 per cent as corporate activity slowed down. In an interview with Surabhi,Sen who is also the country’s former chief statistician,says that India has the capacity to generate 7 per cent growth just by boosting domestic growth drivers.
What is your take on the first quarter GDP data?
The story is a little worse than what the 4.4 per cent number says. Internationally,the data used is GDP at market prices where as in India we use the GDP at factor cost. India’s GDP at market prices grew at 2.9 per cent in the first quarter,so globally we are almost at the bottom of the pile,with Brazil behind us at 2.2 per cent. This kind of difference between GDP at factor cost and GDP at market price is due to rising subsidies. Basically,this means that the government is not increasing income but only redistributing income from the future to the present.
Do you think growth has bottomed out? Can we manage 5.5 per cent this fiscal?
It can happen. Quarterly GDP numbers are largely based on corporate sector data. If the non-corporate sector the SME sector does better,then the final GDP figures will be much higher. But that does not take away the problems of GDP at market prices.
The data on the net indirect taxes are final and will continue to result in a difference of 1.5 per cent between GDP at factor cost and at market prices. Subsidies wont go away so GDP at factor cost is a bad measure to estimate production in an economy.
The manufacturing and corporate sectors are weak…
The bigger and more immediate problem is that India’s corporate sector is in deep,deep trouble. The corporate sector is simply not confident enough to commit large amounts of investments,which is the heart of the problem. Also,the government hasn’t done enough to bring back that confidence. So how long can SMEs shoulder the burden of boosting growth? States also need to review measures it can take to promote SME sector.
How far will good monsoons and higher farm growth help revive growth?
It can have quite a huge impact but we have to be a little cautious. In the past,really good monsoons have led to rural distress. A substantially high production of food grains and low elasticity of demand can lead to a crash in prices.
Will slow growth in the euro zone or fresh international trouble further hit growth?
Despite slow growth abroad,we need to focus on boosting growth drivers in the country. Any objective assessment will show that even with zero global growth,if we do things right at home,we can grow at 6 to 6.5 per cent on our own. So even for 7 per cent growth,we don’t need to look abroad,we just have to do things right.