We must look beyond India’s exciting headline GDP numbers
RBI) own estimate of 6.5%, in the shade. At 7.6%, Q2 growth came on the back of buoyancy in manufacturing (at 13.9%) and construction (13.3%). Gross value added (GVA), often seen as a better estimate of the true level of activity, grew 7.4%.
The numbers are testimony to the “resilience and strength of the Indian economy in testing times," said Prime Minister Narendra Modi. Chief economic advisor V. Anantha Nageswaran was guarded, saying, “We need to work out the numbers and see what kind of upside it imparts to the overall estimate for the year." Understandably so.
Geopolitical factors, the strength of the US economy and hence the US Federal Reserve’s continued fight against inflation, and the ongoing global slowdown are sure to lower growth in the second half of the year. But with 7.7% real GDP growth in the first half, overall growth for the full year could end up a tad higher than earlier estimates of 6.5%, making India one of the fastest growing major economies in the world. Terms like ‘blockbuster’ and ‘scorching’ have been used and this euphoria over the official data is not entirely surprising.
But after all the hosannas have been sung, a discerning look at the disaggregated numbers throws up some disquieting features. First, agriculture, on which a large chunk of our population depends, has grown at a 17-quarter low of 1.2%. True, some of the decline can be attributed to erratic monsoon rains this year.
Also, the share of allied activities in the farm sector helps cushion the weak monsoon’s shock to rural incomes. But the fallout will have an adverse impact on rural consumption at a time when private consumption shows signs of slowing. Growth in private consumption, which accounts for close to 57% of GDP, was
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