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UPA-II’s economic report card sparkles as new figures show 7.1% average growth

India’s economy did not fare badly during the second stint of the Manmohan Singh government as was estimated earlier. Economic growth numbers were revised on Friday to just below 5 per cent and above 6 per cent for 2012-13 and 2013-14, respectively, compared to sub-5 per cent calculated earlier.

This may also boost economic growth prospects in the first year of the National Democratic Alliance government against the expected 5.4-5.9 per cent. Former finance minister P Chidambararm said, “I am happy that the government has released the revised GDP data. It should put an end, once and for all time, to the misconceived charge that the UPA government had mismanaged the economy.”

Meanwhile, the Centre’s fiscal deficit crossed the Budget estimates in just nine months of the current financial year, which will force Finance Minister Arun Jaitley to keep the Centre’s revenues above expenditure in the last three months to maintain the target of reining in the deficit at 4.1 per cent of GDP.

The gross domestic product rose 4.9 per cent in 2012-13 against 4.5 per cent estimated earlier and 6.6 per cent in 2013-14 against 4.7 per cent given earlier, according to the new set of numbers released on Friday by the Ministry of Statistics and Programme Implementation.

With the new numbers, average economic growth stood at 7.1 per cent in the five-year second stint of the UPA government, compared to 6.68 per cent estimated earlier.

Per capita income rose from Rs 61,855 to Rs 64,316 a year for 2011-12, from Rs 67,839 to Rs 71,593 for the following year and from Rs 74,380 to Rs 80,338 for 2013-14.

Usually, the numbers are revised once the annual survey of industries comes, but this time the numbers were changed because of a new base year of 2011-12 against the earlier series of 2004-05.

The government has said henceforth gross domestic product would include indirect taxes, technically called GDP at market prices, instead of GDP at factor cost, exclusive of indirect taxes, which has been taken for calculating economic growth so far. This may put India on a par with international standards but will rejig all growth figures calculated so far.

If one takes GDP at market prices, India’s economic growth would be substantially higher at 5.1 per cent in 2012-13 and 6.9 per cent for 2013-14.

With the practice being adopted, India will actually overtake China in terms of growth in the next couple of years, if the International Monetary Fund and the World Bank estimates turn out to be true. India’s economy is estimated to grow by 6.5 per cent in 2016-17 against China’s 6.3 per cent in 2016 and both the growth rates are estimated at GDP at market prices by the Fund. The Bank projected India’s economic growth rate at 7 per cent against China’s 6.9 per cent.

Within GDP, share of manufacturing rose from 12.9 per cent in the old base to 18 per cent in the new series for 2013-14. The government wants to increase the share from 16 per cent to 25 per cent in a decade. It would get some boost through this statistical illusion.

While the share of services will come down from around 58 per cent to 51 per cent, that of agriculture will remain almost stagnant at 18 per cent.

The size of the economy shrank to Rs 88 lakh-crore from Rs 90 lakh-crore for 2011-12 and Rs 99.88 lakh-crore from Rs 101 lakh-crore for 2012-13. The economy’s size remained the same for 2013-14 to Rs 113 lakh- crore, a little less than $ 2 trillion.

With revised GDP numbers, fiscal deficit ratios would also stand revised slightly for 2011-12 and 2012-13. The deficit rose to 5.8 per cent of GDP from 5.6 per cent for 2011-12 and 4.9 per cent from 4.8 per cent for 2012-13. Against much speculation of revision in the fiscal deficit ratio for 2012-13, it stood intact at 4.5 per cent. Meanwhile, the deficit ballooned to Rs 5.32 lakh -crore during April-December of 2014-15, crossing the full-year’s Budget estimate of Rs 5.31 lakh-crore by 0.2 per cent even as the finance ministry has been expressing hope to meet the target of reining in fiscal deficit at 4.1 per cent of GDP.

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