Come on CSO (Central Statistics Office), you are spoiling the three-year party! We were waiting for March to end so that we could get cracking at the three-year back-patting and claiming that the policymakers were implementing “my policies’’. But fortunately, you have given us the path of growth. The economy was growing at seven per cent. The agriculture story was so so, but you can’t blame policy for the weather. Manufacturing was growing at seven per cent. Of course, the Index of Industrial Production (IIP) grew by 2.7 per cent, so there was a story there. But by the time we pen to paper, the CSO changed the world. Now in March, the IIP grew by 3.7 per cent. So all is well.
In industry, we are grateful for small mercies. The days when industry was to grow by over seven per cent, a global standard of good industrial performance for a developing economy, were gone. So now has the “normal’’ for industry changed? But by the time the ink was dry, it was announced that in April 2017, manufacturing grew only by 2.6 per cent as compared to 5.5 per cent in April 2016. Maybe the IIP, which measures physical output and not value added, will do better. But no. Industrial output as measured by the IIP grew only by 3.1 per cent compared to 6.5 per cent in April 2016.
This raises many questions. The revised series of GDP and IIP were showing a higher performance for earlier years, which would have meant that we were earlier working with outmoded data, excluding new industries, lamenting slow growth of outmoded products and ignoring the dynamics of growth. Now in March and April, the new series is showing the same old slow pattern of growth. Is this also data induced? Probably not, even though it needs to be accepted that systems of numbers take time to gell. Why I don’t know, but they do. The CSO, to be fair, had given a longish methodology note.
Are we then seeing a new low “normal”? What it would imply is the technological opportunity created by the tremendous innovations taking place in India and the world gave us new opportunities and high manufacturing growth, but that potential is tapering off. I don’t believe this. We need some data and judgement-based alternate thinking and policy insights rather than be in a denial mode.
The investment context is very depressing: From almost a third of the GDP, it is getting close to a quarter of the GDP. It is here that China keeps on proving the pundits wrong: Its infrastructure investments back a solid industrial revival despite the negative talk. Perhaps, China has a surplus of infrastructure. But as a recent piece in The New York Times notes, this can be absorbed by fast industrial growth. The NYT article also notes that India is a contrast and its models of Public Private Partnerships have not worked. They get into conflicts with regulators, ask for revision of terms which are not feasible on account of legal barriers and then lead to withdrawal symptoms. Chinese investments are largely public sector led. Public investments in India have gone down from 32 per cent of the GDP to less than 28 per cent and are spiraling down. The reliance on the Goods and Services Tax is a little exaggerated for its short-run effects are not going to be large. The NITI Aayog has also in its Three Year Vision document given the calculations in terms of the revival of investment and the leading role of public investment. The importance of the present at the expense of the future came out starkly when Finance Minister Arun Jaitley rubbished the Aayog’s proposal to raise resources from agriculture for investment.
The economy clearly has a reservoir of possibilities. Instead of just stating a vision, it is high time that policymakers gave us the policy outline of the path going up. Otherwise we will, like Oliver Twist, be left asking for more.