Focus on employment generation crucial
The Central Statistics Office (CSO) has estimated the third quarter GDP growth at 7 per cent even as experts projected it to be lower due to demonetisation. The full year GDP has been pegged at 7.1 per cent in the second advance estimate.
It proves all Cassandras wrong about the impact of note ban on growth. Therefore, eminent people like former finance minister P. Chidambaram and others should do some introspection and think about where did they go wrong. But at the same time, these numbers continue to be based on new series, which does not reflect the ground economic realities as honestly as it should do. The government should therefore do well to rectify this discrepancy. Otherwise, it makes policy-making very difficult.
Irrespective of the growth numbers that have come up, it is a fact that employment has not been growing in the economy. Private investment continues to be sluggish. Given this, the government should focus all its attention in a very urgent manner to generate employment. It is critical for putting the economy back in shape and also maintain political and social stability in the country.
Given the estimate for the full financial year at 7.1 per cent, the GDP should grow at 6.8 per cent in the fourth quarter. It is higher than what everyone expected it to be. That shows that the effect of demonetisation is beginning to be felt in the Q4 and may therefore be felt in the longer lag in the first and second quarter of FY18. The government should be prepared for that. Everybody expected the demonetisation impact to be felt in the third quarter but that is clearly not the case. The CSO has come with higher number despite the higher base (revised) in the last year. But the fourth quarter is down and may well continue in the first half of 2017. Therefore, government must not let up in any way in its efforts to expand demand and generate employment.
Core sector and IIP (Index of Industrial Production) both are down. The output in sectors like cement, fertiliser and steel has contracted. The IIP numbers have been weak. But this is the problem with this new data. The value added data is not consistent with the volume data. But the very good part is the strong growth in agriculture sector. Nobody expected 6.6 per cent growth. The best of the best estimate was 4-4.8 per cent. That should help RBI to give up any idea of a rate hike. Better agriculture performance means the price of food will continue to be remain soft and that is very important component of CPI retail.
(As told to Nirbhay Kumar)