Revised GDP Fig for FY 12 at 4.5% -- Good News for the FM

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CSO has come out with revised figures for the FY 12 and has reduced the GDP growth rate of 5% to 4.5%.

The fact that there is a such a huge time lag between the projected figures and the actual figures gives ample room for jugglery at the Finance Ministry.

It is no surprise that there has been no comment from the Govt on these revised figures.

Worse than you thought: Revised growth figures for '12-'13 under 5% | The Indian Express

Economic growth sputtered to a decade low of 4.5 per cent in FY 13, lower than the earlier forecast of 5 per cent, as both manufacturing and farm sectors performed worse than expected. This is the slowest growth since FY 03 when the GDP grew at 4 per cent.
"Gross domestic product at factor cost at constant prices in 2012-13 is estimated at Rs 54.8 lakh crore as against Rs 52.5 lakh crore in 2011-12 registering a growth of 4.5 per cent during the year," the Central Statistics Office said in its first revised estimate of national income released on Friday.
As a result of the slowing economy and high inflation, India's real per capita income also remained almost flat at Rs 38,856 for FY 13 as against Rs 38,048 in 2011-12, rising by just 2.1 per cent, against an increase of 5.1 per cent during FY 12. According to the CSO, the secondary sector grew at 1.2 per cent as against the previous forecast of 2.3 per cent while the primary sector too expanded at a slower than estimated rate of 1 per cent against the earlier estimate of 1.6 per cent, which was based on advance indicators.

 

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However there is a silver lining for the FM.

With the figures for FY 12 going down there is a possibility that the FM will be able to project higher GDP figures for FY 13 based on the lower base.

Remember the GDP growth figures are based on the previous years figures.

Firstpost has a very interesting take on this new revised figures and their implications.

Why CSO's lower GDP estimate for 2012-13 will now help Chidu | Firstpost

The CSO has indeed revised its 2012-13 growth figure. Only it is downward and not upward. GDP growth for 2012-13 is now officially 4.5 per cent. These figures are not being rebutted or questioned this time around. Dare one suggest, then, that this figure actually suits the government? A lower base in 2012-13 could give growth in 2013-14 a chance of touching 5 percent, which the government is desperate to achieve and which seems completely elusive as of now. When growth moves from 4.5 percent to 5 percent, the government can piously claim it has nursed the economy back to health and put it on the path of recovery, deflecting criticism that it put the economy in the ICU in the first place.

The CSO-finance ministry spat notwithstanding, there is a nagging feeling that the various revisions in the growth figures seem to be designed to help the government present a rosier picture than is actually the case.

But the swings in the various revisions in numbers between the various levels of estimates do raise doubts. After the advance estimates of growth in a particular year, estimates go through four revisions – a provisional estimate, first, second and third revision. In the case of 2010-11, while the advance estimates predicted 8.6 percent growth, the first two revisions lowered it and the second revision took it to 9.3 percent. The final revision, however, brings it down to 8.9 percent. Similarly, growth in 2011-12 has moved up and down from 6.9 percent to 6.7 percent at the time of the second revision. Economists are surprised at the fluctuations in estimates; there should be a clear pattern, some say. If the CSO isn't helping the government with convenient figures, then it is perhaps doing a pretty bad job with income statistics.

The latest figures show that under UPA-II, the economy has been going into a steady decline. The government returned to power after a bad year – growth in 2008-09 suffered because of the global financial crisis. It appeared to start off well, getting growth back to 8.6 percent and then 8.9 percent. But after that it seems to have lost the plot, with growth slumping to 6.7 percent and then 4.5 per cent. The savings rate is down to 30.1 percent, the lowest in the last nine years, according to the State Bank of India's Ecowrap release. The investment rate has been declining since 2009-10, a sign of complete lack of confidence on the part of industry. And there is little to indicate that things are improving in 2013-14.