Govt revises GDP growth rate in India downward: 6 must-know things

Updated: Feb 3 2014, 20:22pm hrs
India GDP growthInterestingly, the nominal GDP for FY13 has been revised upward to 12.2% from 11.7% earlier. (AP)
The revision in GDP growth rate in India brings more gloom to the economy. In black and white, get up-to-speed with the 'event' as well as the outlook.

1. On the one hand, GDP number for FY11 and FY13 stands revised downwards to 8.9% & 4.5% from the earlier estimate of 9.3% & 5.0%, respectively. Now, Indian economy has two sub-5% growth years in succession.

2. Interestingly, the nominal GDP for FY13 has been revised upward to 12.2% from 11.7% earlier.

3. Thus, for FY13, real GDP has been revised downward while nominal GDP has been revised upward.

4. On the other hand, FY12 GDP figure is revised upwards to 6.7% from 6.2%, primarily due to sharp upward revision in industry segment to 7.8% from 3.5%.

5. Both Savings and Investment rates declined in FY13 as compared to FY12, which is a major concern. Savings rate of 30.1% in FY13 is the lowest in last 9 years (FY04: 29.0%).

6. Outlook: We dont see any upward revision in FY13 data in its subsequent revisions. In FY14, we also expect GDP growth at 4.8% with a downward bias.

By Dr. Soumya Kanti Ghosh, Chief Economic Adviser, Economic Research Department, State Bank of India

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The revision in GDP numbers brings little cheer and more gloom for Indian economy. On the one hand, GDP number for FY11 and FY13 is revised downwards to 8.9% & 4.5% from the earlier estimate of 9.3% & 5.0%, respectively. Interestingly, the nominal GDP for FY13 has been revised upward to 12.2% from 11.7% earlier. Thus for FY13, real GDP has been revised downward while nominal GDP has been revised upward. On the other hand, FY12 GDP figure is revised upwards to 6.7% from 6.2%, primarily due to sharp upward revision in industry segment to 7.8% from 3.5%. We dont see any upward revision in FY13 data in its subsequent revisions. In FY14, we also expect GDP growth at 4.8% with a downward bias. Hence, now with todays release, Indian economy has two sub-5% growth years in succession. Both Savings and Investment rates declined in FY13 as compared to FY12, which is a major concern. Savings rate of 30.1% in FY13 is the lowest in last 9 years (FY04: 29.0%).

Revision in Annual GDP Numbers

* CSO today released revised estimate (RE) of GDP for the last three fiscal years (FY11, FY12 & FY13).

* For FY13, the first RE of GDP slashed to 4.5% from the earlier estimate of 5.0%, mainly due to the downward revision across all segments except manufacturing and financial services.

On the positive note, the 2nd RE of FY12 GDP placed at 6.7% from the 1st RE of 6.2%, primarily due to significant upward revision in manufacturing sector GDP. After including ASI data, manufacturing GDP accelerated to 7.4% (registered: 9.4% and unregistered: 2.7%) from 2.7% (registered: 2.6% and unregistered: 3.0%). But, the FY12 revised number 6.7%, is near to the earlier advance estimate of 6.9%. Similar sharp revision is seen in Construction from previous estimate of 5.6% to 10.8% in revise estimates.

* However, in the 3rd & the final revision of FY11, GDP number dipped to 8.9%, from the previous estimate of 9.3% (2nd Estimate).

Savings & Investment Rate

* Savings rate fell to a 9-yr low of 30.1% in FY13 from the all-time high of 36.8% in FY08. However, the good news is that the financial savings rate increased marginally to 7.1% in FY13 from 7.0% in FY12. Savings in physical assets wilted by one percentage points to 14.8% in FY13 from 15.8% in FY12.

* Investment rate also fell to 34.8% in FY13 but above the level we saw in the crisis year FY09, when it stands at 34.3%. The gap between savings and investment has widened to 4.7% in FY13 from 2.7% in FY09.

Expenditure on GDP

* On the expenditure side, the composition of GDP remains largely unchanged except a secular fall in share of changes in stocks over three years in the revised estimates. The fall may be explained by sharp upward revisions in industry GDP.

* There is also some increase in share of valuables in the revised estimates of FY13 to 2.6% from 2.5%.

Also Read: India's GDP growth rate likely to touch 7.5-8 pct in 2014: Montek Singh Ahluwalia