Q2FY19 GDP – TO BELIEVE OR NOT TO BELIEVE……

about 4 months ago
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The Q2FY19 GDP came in at 7.1% v/s 8.2% (QoQ) and v/s 6.3% (YoY).

The GVA came in at 6.9% v/s 8% (QoQ) and v/s 6.1% (YoY).

Lot of volatility, retrenchment of credit, the rupee and crude oil’s wild oscillation – all these factors had an impact on the growth in current Q2 despite having a favourable base effect. Surely some part of the liquidity crunch was felt in overall Q2 GDP.

Agriculture GVA did well at 3.8% v/s 1.7% (YoY) while manufacturing at 7.4% does indicate that activity has picked up.

Gross fixed capital formation has risen by 12.5% while Govt final consumption was at 12.7% and private final consumption at 6.9%. This indicates that in the second half of FY19, we still cannot expect private sector to fire up the economy.

Somehow with so much politics now seeping into calculation of GDP numbers, with the aim being more about putting the previous Govt down than concentrating on looking ahead, this constant move to revise the numbers, under the pretext of improving credibility, is in fact making it less credible.

Maybe the previous Govt fudged numbers and maybe this Govt is indeed doing great. But a small example under the new revised series shots loud about credibility. 2007-08 was a boom year and under the old series, the growth then was 9.8% but under the new series, it comes down to 7.7%. Compare this to FY14 when the economy was going through throes of pain, the new series puts the growth at 6.4%. How is that possible?

And then before the GDP numbers, there was the announcement of the fiscal deficit, which shows that clearly expenditure is completely out of control.  India's April-October fiscal deficit stood at Rs 6.49 trillion or 103.9% of the budgeted target for current fiscal year. Surely with mergers of PSUs and other plans on the anvil, no wonder the Govt is saying that it is confident of meeting the targeted fiscal deficit of 3.3% of the GDP in FY19.

The silver lining here – under the current circumstances, irrespective of what most analysts feel, this 7.1% growth for Q2 is not bad at all. We also have a lower inflation and this in turn means, RBI might not hike rates any time soon; surely not in Dec.

With everything now geared up for the 2019 polls, let’s take every data with a pinch of salt. But seriously, if today we have no faith on the given GDP data, surely we need to come up with something better, something which is actually “real” and “countable.” 

The next release of quarterly GDP estimate for the quarter October-December, 2018 (Q3 of 2018-19) will be on 28.02.2019. But are we going to be waiting with bated breath and anticipation?

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