Reassuring CSO estimates

Reassuring CSO estimates
The Economic Times, February 10, 2009, Page 14

Disaggregated Numbers Not So Promising

THE Central Statistical Organisation’s (CSO) advance estimate of GDP growth for 2008-09 — 7.1% — is of interest for two reasons. One, it is in line with recent estimates made by two respected entities: the RBI (7%) and the Prime Minister’s Economic Advisory Council (7.1%). Two, they provide much-needed solace that GDP growth would not decelerate to below 7%. Of course, these are only advance estimates and cannot be taken as the last word. Last year, for instance, advance estimates placed GDP growth for 2007-08 at 8.7%. However, quick estimates revised the growth rate upwards to 9%. This time around, it is unlikely we will see the numbers being revised upwards; nevertheless to the extent the CSO is best placed to make macro estimates, their numbers certainly carry greater credibility.

That’s the reassuring part; what is less reassuring emerges from an examination of the disaggregated numbers. First, agriculture is projected to grow at just 2.6%, down from 4.9% the previous year. Given that close to 65% of the country’s labour force is dependent on agriculture, a slowdown here means more human distress than what the numbers tell. Second, manufacturing growth is expected to halve — from 8.2% the previous year, growth is expected to be just 4.1% in 2008-09. Agreed, index of industrial production numbers released till November 2008 had already given us a grim warning. Nonetheless, CSO numbers that confirm the gloom on the manufacturing front are not a happy augury. On the services front, CSO numbers bear out the slowdown in construction — down from 10.1% last year to 6.5% this fiscal. Predictably, ‘community, social and personal services’ are expected to record a dramatic increase — from 6.8% last fiscal to 9.3% this year. But a large part of the increase here is probably on account of the Sixth Pay Commission largesse and NREGS payouts. So is there no silver lining? Yes, there is. The rate of gross fixed capital formation has held up; indeed it is largely higher at 32.1% as against 31.6% last fiscal. Not much, perhaps, but in gloomy times, good enough.