Wednesday, May 27, 2015

Economy in 2014-15 a notch better than the economy in 2013-14 The BJP should stop talking half-truths, half-lies about the economy

New Delhi: Prime Minister Narendra Modi and his colleagues want to believe that the Indian economy was in an abyss, and that in the last one year, the government had pulled it up from the deep. It is good political rhetoric but it shows scant respect for facts. A government that cannot handle facts will not be able to govern well. Of course, the UPA ministers too talked the same language in 2004 when the Congress and its allies came back to power after eight years in political wilderness. They did not linger on that kind of infantile talk for too long. Hopefully, NDA2 will stop harking back to the UPA2 days to beat their own drum.

According to the Gross Value Added (GVA) criterion adopted in the new series with the baseline of 2011-12, agriculture and allied sectors grew at 3.7 per cent in 2013-14, and by 1.1 per cent in 2014-15. Industry grew by 4.5 per cent in the last year of UPA2 and by 5.9 per cent in the first year of NDA2. The respective figures for the services is 9.1 per cent (2013-14) and 10.6 per cent (2014-15).

The Index of Industrial Production (IIP) in the April-February 2013-14 was (-) 0.1 per cent and the corresponding figure for April-February 2014-15 is 2.8 per cent. The Modi government can claim that they have turned things around, and pulled the IIP from the negative to well above the positive. The change may have nothing to do with the new government but as a matter of poetic indulgence, the Modi government should be allowed to take the credit.

But there is another figure which needs to be looked at. Growth in eight core infrastructure industries in the period from April 2013-February 2014 was 4.2 per cent and it moved down to 3.8 per cent in the corresponding period of April 2014-February 2015. It may not be fair to blame the Modi government for this but it it wants to claim credit in other segments of the economy where the numbers are positive, then it will have to take responsibility for the decline in numbers, however marginal. These are details, and details are very important. They reveal the complexity of the picture.

The quarterly growth rates in the last year of UPA2 and the first year of NDA2 reveal close trends. The growth rate in the first quarter of 2013-14 was 7.2 per cent, and in 2014-15 it was 7 per cent. The growth rate in second quarter of 2013-14 was 7.5 per cent and in 2014-15 it was 7.8 per cent. In the third quarter of 2013-14, the growth rate was 6.6 per cent and in 2014-2015 it was 7.5 per cent. Apart from the first quarter, there has been improvement in growth rates of the second and third quarters of 2014-15 over that of the same period in 2013-14. Why does it become important to emphasise these quarterly growth rates? It becomes necessary to do so because the truth seems to be that the economy has been doing not too badly in 2013-14 and the figures in 2014-15 are only an improvement on the 2013-14 figures.

The power sector figures provide another interesting example of how the growth in the first year of NDA2 is just a bit better than the last year of UPA2. The electricity generation in 2014-15 is 1048.4 billion units compared to 967.2 billion units in 2013-14, which marks a 8.4 per cent growth. It is a good rate of growth but there is nothing dramatic about it. The installed capacity as on March 31, 2013 was 2,23,344 Mega Watts, and on March 31, 2015 it was 2,67,637.4 MW. In the last year of UPA2, 17825 MW was added, and 22566.3 in 2014-15, an impressive increase of 27 per cent.

When NDA1 demitted office in 2004, the growth rate for that year was 8.4 per cent, which was good. But it was not the story for the previous years. As a matter of fact, the Economic Survey for 2004-2005 notes that the 8.4 per cent growth rate was because of the lower base of the previous years. But there is no doubt that it provided the momentum for the UPA1 years. Similarly, the not-so-unimpressive growth figures of 2013-14 provide the base for the first year of NDA2's economic growth.

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