The Telegraph
Since 1st March, 1999
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The Central Statistical Organization’s advance gross domestic product growth estimates for 2002-03 are 4.4 per cent, compared to 5.6 per cent in 2001-02. While a lower base in 2002-03 augurs well for growth in 2003-04, the tenth plan (2002-07) projections of 8 per cent have gone for a six. To attain that 8 per cent target, the planning commission required the economy to grow at 6.7 per cent in 2002-03. Not only do we have 4.4 per cent in 2002-03, but 2003-04 is also unlikely to log in significantly more than 6.5 per cent. With state-level and Central elections in the offing, and no significant reforms likely, 8 per cent belongs to the world of dreams, with adverse implications for poverty reduction, government revenue and fiscal deficits. But over-reaction to CSO’s advance estimates is unwarranted. In the past, it has not been uncommon for advance estimates to be revised upwards later. This reflects the unsatisfactory state of affairs in collecting data for national income accounting, especially for agriculture and services. The dip in 2002-03 is largely explained by agriculture and allied activities, which dropped from 5.7 per cent growth in 2001-02 to minus 3.1 per cent in 2002-03. This is largely attributed to drought. While it is no one’s case that drought was unimportant, and foodgrain production is likely to be 183 million tonnes in 2002-03 (compared to 212 million in 2001-02), it is also true that state governments have a vested interest in pushing the case for drought.

Calamities provide more Central assistance, and CSO’s advance estimates are based on data provided by state governments through the agriculture ministry. Had drought indeed been that severe, there would have been upward pressure on food prices and increased off-take from the public distribution system. Drought-affected states like Andhra Pradesh would not have been able to offer rice for procurement, and consumer demand would have been affected more adversely. There are thus indications that the 3.1 per cent drop in agriculture in 2002-03 is exaggerated and will be revised upwards later. That apart, agriculture accounts for 25 per cent of GDP. Manufacturing accounts for 25 per cent and grew at 6.1 per cent in 2002-03, compared to 3.4 per cent in 2001-02. Services account for 50 per cent and some service sectors registered better performance in 2002-03. Service sector growth is linked to what happens in manufacturing, which is showing signs of recovery. Hence, it is plausible that CSO will later revise growth figures in 2002-03 to 5 per cent plus and, subject to question marks about Iraq, 2003-04 may produce 6 per cent plus. This 5 to 6 per cent growth band is a far cry from the 8 per cent touted in the tenth plan.

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