Seventh Pay CommissionDecember 5, 2015
Inclusion of Yuan in SDRFebruary 22, 2016
The Indian Growth Rate, It’s not a great time for major emerging economies right now, but India remains a bright spot. The latest government data shows that the annual economic growth actually accelerated to 7.4 percent in the last quarter, up from 7.0 percent in the previous quarter. These are fantastic numbers in a world where real economic growth is slowing down. Even China is finding it tough to grow at rates that it did in the past. The GDP growth rate means that India comfortably retains its position as the world’s fastest-growing major economy. The question is how believable is this growth of 7.4%? The short answer is—not very. It is worth mentioning here that GDP is ultimately a theoretical construct. Most real economic numbers suggest otherwise.
- The uptick is partly due to an increase in domestic demand. Curiously, Indian manufacturing sector activity fell to its lowest level in 25 months in November 2015, indicating that the increase in GDP growth is largely independent of the manufacturing sector. The Reserve Bank of India Governor Raghuram Rajan recently pointed out that factories were running 30% below capacity as of now. A research report by DBS points out that the capacity utilization rate was at 80% in 2011-2012. This suggests a significant slack in the economy. How is manufacturing then growing by 9%, as suggested by the data released by the ministry of statistics and program implementation?
- Corporate profitability continues to remain subdued. Exports have been falling eleven months in a row. In fact, between April and October 2015, exports have fallen by 17.6% to $154.29 billion, in comparison to the same period last year. Between April and October 2014, the exports had stood at $187.29 billion. A greater than 7% economic growth rate with falling exports is a little difficult to believe.
- The real estate sector, a major employer of people, continues to be in the doldrums, with new launches coming down and the number of unsold homes going up.
- Car sales remain muted. Tax collections have seen slow growth. The number of stalled projects continues to remain huge. Exports are on a decline.