Growth in gross domestic product (GDP) during the financial year’s first quarter has shown promise. But worries remain in the coming quarters due to a below-normal monsoon. Pronab Sen, chairman of the National Statistical Commission, says growth in industry and services would compensate for a dip in agriculture growth. Edited excerpts of talk with Vrishti Beniwal:
GDP growth of 5.7 per cent in the first quarter is better than expected. Will it sustain in the coming quarters?
Up to a point, but a lot depends on what happens to agriculture. In the second quarter, the effect of shortfall in the monsoon will show. We have no idea how that has played out. In the non-agriculture side, the momentum should stay up. So, I would expect it to be somewhere around the same (5.7 per cent) in the second quarter.
The growth in agriculture was 3.8 per cent in April-June. Would that drop?
There would be a fairly sharp drop. I’d expect it to be somewhere under one per cent in the second quarter. That’s when the effect of a bad monsoon will knock in. The first quarter is the harvest season for the previous year and 2013-14 was good, particularly the rabi crop.
The finance ministry is projecting a growth of 5.8 per cent for the year. What is your estimate?
I expect the year to be better because the mood is up. Sentiments have improved enormously and investments are starting to come. Even with the bad monsoon, it can go as high as 6.5 per cent because the turnaround in investments can be very rapid, given the situation we are in.
Trade has not done well in (the) services (sector). What could be the reasons?
Trade is completely linked to what is happening to the commodity economy, particularly consumption. If consumption growth is low, trade will tend to be lower. Consumption goods did not do that well in the first quarter. It should look up.
If there is a monsoon impact on agriculture, would that affect manufacturing because of a dip in rural demand?
A lot depends on what happens to prices. If these go up, which they might due to a bad monsoon, you might get a situation where rural demand is badly affected.
To what extent could the Supreme Court’s decision on illegal coal mines affect growth prospects?
As it is, we have idle power plants because of insufficient coal. Of the blocks declared illegal, I don’t know how many of those are actually feeding power plants. It could have some impact.
Looking at all the macroeconomic indicators, are green shoots (of growth recovery) visible?
There is evidence of a strong recovery and that is showing in the numbers. Nobody was expecting 5.7 per cent for the first quarter.
We had a new government taking over in the middle of the quarter. How much of the growth can be attributed to a change at the Centre?
The recovery started before the new government took over. Industrial output showed up from March itself. (After the formation of a new government) Essentially, the momentum is positive and that’s showing.