New Delhi: The Indian economy’s recovery from the global downturn was sharper than was earlier expected, according to the revised data of national income released by the government on Monday.
The Central Statistics Office (CSO) raised India’s gross domestic product (GDP) growth rate for 2009-10 to 8% from the earlier estimate of 7.4%. The change came on the back of higher growth in government spending as represented by community, social and personal services, which was raised from 5.8% to 11.8%.
“The recovery has come more on the back of stimulus, which is the pattern throughout the world,” said HDFC Bank Ltd chief economist Abheek Barua. The earlier estimate of 5.8% growth in government spending did not capture the pay revision for government employees and the government’s fiscal stimulus, he said.
The statistical organization also made minor revisions to earlier GDP data since 2004-05. For example, GDP growth for 2008-09 was revised to 6.8% from 6.7% earlier. CSO said estimates of GDP and other aggregates for previous years were revised on account of the new series of Wholesale Price Index (WPI), which counts 2004-05 as the base year, and the subsequent revision in the index of industrial production (IIP).
Graphic: Ahmed Raza Khan/Mint
“The revision in estimates is also on account of use of latest available data on agricultural production, industrial production, government expenditure and also detailed and more comprehensive data available from various source agencies,” it said.
“The change in overall base to 2004-05 from 1999-2000 has given more weight to the new economy,” said N.R. Bhanumurthy, professor at National Institute of Public Finance and Policy. “If you base your macro forecast on 2004-05, the growth rate will be higher.”
Bhanumurthy, who forecasts economic indicators, said the 2004-05 base year pushes the production function above the previous base year’s function. For instance, the old base year included typewriters, which do not find a place in the new base, he said, explaining that the new base captured the underlying structural change in the economy.
Barua said the higher GDP growth rate in 2009-10 will not significantly impact forecasts for the current fiscal that ends 31 March. “The GDP forecasts may be revised a little below 8.5%, but I do not see a huge downward revision in forecasts for the current fiscal because GDP deflator need also to be adjusted with the new base,” he said.
Fiscal deficit at lowest in over a decade
Fiscal deficit in the first nine months of 2010-11 was Rs 1.71 trillion, the lowest in over a decade on account of better-than-expected revenue growth.
According to data uploaded on Monday by the Union government’s controller general of accounts (CGA), fiscal deficit at the end of December was 44.9% of the budget estimate for the fiscal year. In the corresponding period of the previous fiscal year, it was 77.3% of the budget estimate.
Fiscal deficit estimate for 2010-11 was Rs 3.81 trillion. The relatively low fiscal deficit registered in the current fiscal year was led by a revenue collection of Rs 5.84 trillion, 85.6% of the budget estimate.