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

Communal rhetoric? Hindutva preached by RSS-BJP is 'monolithic', not Hinduism

By Prem Verma*  I am a devout Hindu but not a believer of RSS Hindutva form of Hinduism which brings about hatred of other religions. My Hindu religion has not taught me to look down on other religions and neither has it instilled in me to go about converting others to my religion because my religion is superior.

Gross 'injustice' to children: Rs 5000 cr cut in education budget; 15 lakh schools shut down

Counterview Desk  More than 100 dignitaries, including educationists, academia, social activists, teachers’ union, civil society organisations (CSOs), various networks and people working on child rights, in a letter to Union Finance Minister Nirmala Sitharaman have sought reversal of reduction in allocation for education in the Union Budget 2021-22, even as demanding substantial increase in it.

Buddhist shrines massively destroyed by Brahmanical rulers in "pre-Islamic" era: Historian DN Jha's survey

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

India sees 62 journo deaths, 4th highest, amidst pandemic: Swiss media rights body

By Our Representative The Switzerland-based media rights body Press Emblem Campaign (PEC) has noted that India is the fourth most affected country as far as mediapersons’ death on account of Covid-19 is concerned. According to Blaise Lempen, secretary-general of PEC, the global tally of casualties among media persons in the Covid-19 pandemic has reached 1,036 journalists in 73 countries till date.

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

RSS love for 'killer' Myanmar junta behind Indian military presence at Tatmadaw Day?

By Shamsul Islam*  If a shameful act means an action which is criminal and nauseating, it would be an understatement to describe the attitude of the present RSS-BJP rulers of India towards the demolition of democracy and large-scale killing of the people of Myanmar by the military ( tatmadaw ) junta which took power through a coup on February 1, 2021 after renegading the election results in which the party of Aung San Suu Kyi, National League for Democracy, was a clear winner.

Chhattisgarh’s Apra riverfront imitates Sabarmati: 'Devaluing' water, environment

Sabarmati riverfront By Mansee Bal Bhargava*  This year’s #WorldWaterDay (March 22) focus was on ‘Valuing Water’. My school friend, Pragati Tiwari from Bilaspur, Chhattisgarh, called that day knowing my interest in water matters. We were remembering our childhood days as how we used to play on the banks and the bed of the Arpa Nadi (River) during the summer holidays and as how the river would swell like Anaconda to flow happily during the monsoon.

Bihar massacre on Holi day: Brahminical, casteist mindset behind 'uneasy' silence

Bihar chief minister Nitish Kumar By Vidya Bhushan Rawat*  Several people were killed in Bihar amidst Holi festivities, but not much response has come in from the media. The silence of the government and the society as a whole is also appalling. We seek to romanticise these festivals, yet we forget that every year they take so many lives. This despite the fact that Holi appears to be the best time for 'avenging things'.

India's draft migrants policy: Whither concern on job restrictions imposed by states?

By Anil Kumar*  India’s Niti Aayog has prepared a Draft Migration Policy. The draft policy acknowledges migration as an integral part of development, and it calls for positive government interventions that facilitate internal migration. With a rights-based solution to migration, the draft states that the policy should “enhance the agency and capability of the community and thereby remove aspects that come in the way of an individual’s own natural ability to thrive”.

Gujarat religious freedom amendment bill 'pursues' votebank politics, is anti-minority

Gujarat home minister Pradeepsinh Jadeja  By Our Representative  A Gujarat-based minority rights organisation, taking strong exception to the state assembly last week passing the Gujarat Religious Freedom (Amendment) Bill, 2021, has asserted that the proposed law “is completely unconstitutional”, even as asking the Gujarat governor to give his accent to it.