Gross domestic product (GDP) growth at constant prices jumped from 7.2% in the December 2015 quarter to 7.9% in the March 2016 quarter. So, this is a giant step towards the goal of 8% growth or, at the very least, confirmation of a strong recovery in the economy, right? Perhaps not.
The first thing to notice about the GDP numbers for the March quarter is the sharp rise in the item called “discrepancies”. These “discrepancies”, at constant prices, were Rs.1.43 trillion in the March 2016 quarter, while they amounted to Rs.29,933 crore in the March 2015 quarter. So the growth in “discrepancies” year-on-year was of the order of Rs.1.13 trillion, only a bit lower than the growth of Rs.1.27 trillion in private final consumption expenditure (see chart). Clearly, the growth in “discrepancies” was responsible for a large part of the growth in GDP, measured at constant prices, during the March quarter. How large? As the chart shows, growth in “discrepancies” contributed 51% of the growth in GDP in the March quarter. What would GDP growth be if these “discrepancies” are left out? In the March 2016 quarter, at constant prices, it would be, hold your breath, a mere 3.9%.
If this is the quality of the data, there isn’t much left to be said. But, for what it’s worth, growth in private final consumption expenditure was 8.3% in the March quarter while gross fixed capital formation growth was negative. Despite the drought, consumption has led to world-beating growth, ably aided and abetted by “discrepancies”. So consumption and discrepancies drove growth in the March quarter.
Perhaps the gross value added (GVA) numbers are less hallucinatory? Growth in GVA at basic prices is a more modest 7.4% for the March quarter. That too is a big improvement on the 6.9% growth in GVA notched up in the December quarter. But here’s the rub—non-agricultural growth in the March quarter was less than that in the December quarter. Non-agricultural growth in the December quarter was 8.9%, which slowed to 8.4% in the March quarter. The growth spurt in GVA during the March quarter was on account of two reasons—one, a base effect, since growth in the fourth quarter of 2014-15 was a mere 6.2% and two, an improvement in agricultural growth.