Skip to main content

India's manufacturing growth decelerates to 2.7%, consumption-led GDP at 6.3% "unsustainable": Economists

By Our Representative
Even as the Government of India continues to bask in glory over Gross Domestic Product (GDP) rising from 5.7% to 6.3% in the second quarter of 2017-18, two senior economists have come up with data to suggest that there was deceleration in key sectors like agriculture, manufacturing and construction, and, "more importantly, in investment".
Without questioning the methodology of the Government of India, which is under fire for creating a hype around GDP growth, the economists RK Pattnaik and Jagdish Rattanani, who are with the the SP Jain Institute of Management and Research, have said, it was largely a "consumption-led growth."
Not only agriculture should be an area of concern, for it has "shown a significant slowdown at 1.7%, against 4.1% in Q2 of 2016-17", even manufacturing has recorded "deceleration along with construction, where growth has been at 2.6%, down from the 4.3% witnessed in Q2 of 2016-17", the economists say in their analysis "Behind GDP data, some signs of concern".
Insisting that "these developments raise some questions on the soundness and sustainability of the growth trajectory", the economists say, "The stressed balance sheets of banks and corporations continue to act as a drag on investment activity", adding, a comparison of the relevant quarters (Q2 2016-17 with Q2 2017-18) shows that Gross Value Added (GVA) went down from 6.8% to 6.1% and GDP growth down from 7.5% to 6.3%."
Say the economists, "a critical look at the data shows that on the supply side" the sectors where growth is supported is mining, "which recorded a 5.5% growth as compared with 1.3% in Q2 of 2016-17", and "trade, hotel transport and communications... along with public administration and defence."
But add, "On the demand side, growth rates of government final consumption expenditure (GFCE) at constant prices recorded an estimated increase of 4.1%, against 16.5% during Q2 of 2016-17... The growth of private final consumption expenditure (PFCE) moderated at 6.5%, compared with an increase of 7.9% in Q2 of 2016-17..."
The economists predict, "Higher car sales and enhanced international passenger traffic indicate the swelling of urban consumption expenditure. In the near term, the urban and government consumption expenditure will go up due to the impact of the Seventh Pay Commission award. Besides, higher sales of two-wheelers and tractors point to some upward movement in rural demand."
However, they underline, "The stressed balance sheets of banks and corporations have continued to act as a drag on investment activity. Households’ investment in dwellings, other buildings and structures have remained subdued as inventories rise on the hope of steep price corrections."
Giving the example of Mumbai, the economists say, "In the Mumbai Metropolitan Region alone, an estimated 350,000 houses (52% of inventory) under construction are unsold, according to Cushman & Wakefield and realty data analytics firm Propstack."
The economists quote Reserve Bank of India (RBI) to say that "new investment proposals declined significantly in Q2 of 2017-18 in terms of both numbers and value. Only 403 new projects were announced, the lowest since Q1 of 2004-05. Plant load factors in thermal power plants underwent a sustained decline, largely reflecting weakness in demand from financially stressed distribution companies."
Questioning "the predominance of consumption-led growth" as a matter of "serious concern in terms of sustainability", the economists say, it "can arguably lead to a slackening of future growth", as noted by RBI, which showed how it was found to have "a negative impact on GVA growth one-year ahead by 1.39 percentage points at 5% statistical significance level."

Comments

TRENDING

Telangana govt proposes to give unfettered powers to forest officials, 'help' corporates

By Dr Palla Trinadha Rao*
The Telangana Government is contemplating to replace the Telangana Forest Act 1967 with a new law - the Telangana Forest Act (TFA) 2019, trampling the rights of adivasis ensured under the Scheduled Tribes and other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 (FRA Act 2006) and Panchayats Extension to Schedule Area (PESA) Act 1996 both of which are central acts.

Lynching as state terror? Complete dearth of 'political will' to deal with mob violence

By Fr Cedric Prakash sj*
On Friday July 5, thousands of people had gathered at a rally in Surat to protest against the growing mob lynching incidents in different parts of the country. There are different interpretations at what happened during the rally: with police blaming the rallyists and those in the rally blaming the police for using teargas shells upon them without any reason.

RSS, Hindu Mahasabha were 'subservient' to British masters: Nagpur varsity VC told

Counterview Desk
Well-known political scientist Shamsul Islam, associate professor (retired), University of Delhi, in an open letter to the vice-chancellor of the Rashtrasant Tukadoji Maharaj Nagpur University, Dr Siddharthavinayaka P Kane, has taken strong exception to the varsity decision to include RSS’ “role” in nation building in the syllabus of the BA (history) course, citing instances to say that the RSS ever since its birth in 1925 with its Hindutva allies like Hindu Mahasabha led by VD Savarkar worked overtime to “betray the glorious anti-colonial freedom struggle”.

One lakh schools closed down, draft policy 'seeks' commercialisation: Whither RTE?

By Our Representative
A national consultation on the new draft National Education Policy (NEP) with senior experts, teachers’ association representatives and other stakeholders at the India International Centre in New Delhi on July 11, organised by the Right to Education (RTE) Forum, has expressed serious concern over curtailment in the budgeted expenditure on education year after year, even as closure of more than one lakh schools over the "last few years."

British companies export 'deadly' asbestos to India, other countries from offshore offices

By Rajiv Shah
“The Sunday Times”, which forms part of the powerful British daily, “The Times”, has raised the alarm that though the “deadly” asbestos is banned in Britain, companies registered in United Kingdom, and operating from other countries, “are involved in shipping it to developing nations”, especially India. India, Brazil, Russia and China account for almost 80% of the asbestos consumed globally every year, it adds.

Mental health: India's 95% patients "deprived" of medical care, treatment gap 70%

By Moin Qazi*
Among the many challenges India faces, the most underappreciated is the ongoing mental health crisis. Mental illness is actually India’s ticking bomb. An estimated 56 million Indians suffer from depression, and 38 million from anxiety disorders. For those who suffer from mental illness, life can seem like a terrible prison from which there is no hope of escape; they are left forlorn and abandoned, stigmatized, shunned and misunderstood.

Gender budgeting? Govt of India allocates just 2.1%, 0.73% for SC, ST women

By Rajiv Shah
The National Campaign on Dalit Human Rights (NCDHR), one of the most influential all-India Dalit rights networks, has taken strong exception to the manner in which the Government of India has undermined Gender Responsive Budgeting in the Union Budget 2019-20 for scheduled castes (SCs) and scheduled tribes (STs), pointing towards “wide gaps” between the goals and the situational reality of “the Dalit and Adivasi women on the ground.”

UN report notes 'suppression' of Kashmiri independence groups in Pakistan

By Our Representative
A top United Nations (UN) body has suggested that the intense fervour of Kashmiri nationalism isn’t just sweeping the Jammu and Kashmir (J&K) state but is equally strong in the Pakistan-occupied Kashmir (PoK), pointing towards how the Pak authorities have been seeking to suppress it by placing restrictions on rights to freedoms of expression and opinion, assembly and association on every section of PoK’s population.

Campaign 'victory': Bihar considers ban on asbestos, carcinogenic to humans

Counterview Desk
In a major victory for anti-asbestos campaigners, the Bihar government has said that it is considering an immediate ban on use of asbestos&based products of all kinds in the state. Speaking in the state assembly, Bihar chief minister Nitish Kumar insisted on the need to taking a strong policy decision against carcinogenic asbestos factories.
A communication, meanwhile, has been forwarded  to the health secretary by Kumar, referring to concerns of Dr Gopal Krishna, who heads the Ban Asbestos Network of India (BANI) "on hazardous asbestos factories to the health department." Krishna said that the health department should looking into the demand for the creation of a register of victims of asbestos related diseases.
He added, the government should also create a register asbestos laden buildings and products in general and a probe on the health status of workers, their families and communities linked to and in proximity of the two units of asbestos factories…

Satellite data 'identify' Gujarat's Mundra among 6 of India's top air pollution hotspots

By Rajiv Shah
A fresh study, which analyzes data between February 2018 and May 2019, obtained from Tropomi, a satellite instrument on board the Dutch Copernicus Sentinel-5 Precursor satellite, has warned that coal-fired power plants and industrial clusters are India’s “worst nitrogen oxides (NOx) hotspots” contributing hugely to air pollution in Sonbhadra-Singrauli in Madhya Pradesh and Uttar Pradesh, Korba in Chhattisgarh, Talcher in Odisha, Chandrapur in Maharashtra, Mundra in Gujarat and Durgapur in West Bengal.