India's investment to GDP ratio 31%, as against 38% in 2007-08 during economic crisis, 41.2% in 2011
A top New York-based data analysis firm, CEIC Data, has revealed that India's investment accounted for 30.8 % of its nominal GDP in March 2018, a little higher than 30.1 % in the previous quarter. However, it conceded, India's investment share of nominal GDP data from June 2004 to March 2018 averaged 35.1 %, as against the all-time high of 41.2 % in September 2011. It reached a record low of 29.6 % in March 2017, post-demonetization.
The revelation comes amidst one of India's topmost economists, Arun Kumar, Malcolm S Adiseshiah chair professor, Institute of Social Sciences, New Delhi, said that said that even during the period when the world economy was in crisis, 2007-08, India experienced a “The higher growth” which came at the “back of a 38% rate of investment and a 36% rate of savings, achieved by 2007-08”, adding, “These are now down to 32% and 30%, respectively.”
According to Prof Kumar, who is one of India's foremost experts on black money,“The 2007-08 crisis was a global one but the Indian economy continued to grow when many other economies were slowing down due to increase in fiscal deficit from its record low in 2007.” Referring to a relatively GDP growth in 2012-13, he adds, “The crisis of 2012-13 was due to the rise in petroleum prices and largely due to international factors.”
“However”, he explains, “The current slowdown is largely policy induced and less due to international factors. The twin shocks (demonetisation and the GST) have played havoc with the unorganised sector”, whose data, he adds, has not yet been “captured.”
Pointing out that “household savings have declined sharply and the investment climate remains poor with large numbers of dollar millionaires leaving the country”, the senior expert, refers to the manner in which the Government of India first released and then said these updated GDP data were not final calculation and shouldn't be quoted (click HERE), ostensibly because they suggested a better UPA performance.
Advising government to leave “the data debate to experts and not making it a political one”, Prof Kumar, providing a “larger picture of GDP, says, “The new data on GDP have raised a political storm, with the back series for GDP growth since 1993-94 becoming available.”
According to him, “Its importance lies in the fact that in 2015, a new series (with 2011-12 as the base year instead of 2004-05) was announced which showed India’s GDP growing faster than the earlier series had shown. This was politically advantageous to the NDA government which came to power in 2014.”
“But”, notes Prof Kumar, “In the new series, the rate of growth during the last two years of UPA-II was also higher than what the old series showed so that the economic performance under the UPA also did not look so bad. What the new series also showed was that the NDA had inherited an economy with GDP growing at 8.4% in the second quarter of 2014.”
He adds, “Data show that after the NDA took over, the rate of growth fell and then rose to a peak of 8.65% in 2015-16 Q4. After that it fell for five consecutive quarters – to 5.57% by 2017-18 Q1”, as the “two shocks to the economy (demonetisation and then the GST) had a big negative impact on the rate of growth.”
Pointing out that “household savings have declined sharply and the investment climate remains poor with large numbers of dollar millionaires leaving the country”, the senior expert, refers to the manner in which the Government of India first released and then said these updated GDP data were not final calculation and shouldn't be quoted (click HERE), ostensibly because they suggested a better UPA performance.
Advising government to leave “the data debate to experts and not making it a political one”, Prof Kumar, providing a “larger picture of GDP, says, “The new data on GDP have raised a political storm, with the back series for GDP growth since 1993-94 becoming available.”
According to him, “Its importance lies in the fact that in 2015, a new series (with 2011-12 as the base year instead of 2004-05) was announced which showed India’s GDP growing faster than the earlier series had shown. This was politically advantageous to the NDA government which came to power in 2014.”
“But”, notes Prof Kumar, “In the new series, the rate of growth during the last two years of UPA-II was also higher than what the old series showed so that the economic performance under the UPA also did not look so bad. What the new series also showed was that the NDA had inherited an economy with GDP growing at 8.4% in the second quarter of 2014.”
He adds, “Data show that after the NDA took over, the rate of growth fell and then rose to a peak of 8.65% in 2015-16 Q4. After that it fell for five consecutive quarters – to 5.57% by 2017-18 Q1”, as the “two shocks to the economy (demonetisation and then the GST) had a big negative impact on the rate of growth.”
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