The chart shows what the GDP growth rates would be if the government’s final consumption expenditure is taken out of the equation. It’s not really a measure of the impact of the stimulus, because the boost given by the government was partly through excise cuts, while lower interest rates helped increase private consumption in sectors such as automobiles.

Graphics: Sandeep Bhatnagar / Mint

Here’s what the data shows: If we strip away government consumption, then real growth for the rest of the economy was 4.9% in the September quarter, at 1999-2000 constant prices. That’s lower than the 5.5% year-on-year growth notched up during the preceding quarter. The chart shows how growth in the non-government part of the economy came to a standstill during the December 2008 quarter, improved a bit in the March quarter, did substantially better in the June quarter and then slipped back in the September quarter.

The problem is, the last instalment of the pay commission arrears has already been paid, so no further boost to government consumption is expected. Can the private sector take up the slack? It’s clear it didn’t do so in the September quarter.

As Mridul Saggar, chief economist at Kotak Institutional Equities, points out, there is little choice but to cut fiscal gaps if crowding out of private investment through higher interest rates is to be avoided. If private and external demand are unable to make up for the lower government spending and if the excise cuts are rolled back, that points to more muted growth ahead.