The GDP decline to 5.7 per cent in the previous quarter had provided the Congress and other opposition parties a big opportunity to corner Narendra Modi government. Claims were made that economy was on an irreversible path of decline and the prime villain, as they said, was Modi. Mainly, for his decisions like demonetisation and the implementation of GST, which they termed as a “hurried” step executed badly. Modi’s predecessor Manmohan Singh led the charge.
“Both demonetisation and GST have had some impact on GDP…Both would affect the informal sector, the small scale sector that are responsible for 40 per cent of of GDP… 90 per cent of employment is in the informal sector,” Singh was quoted as saying by IANS. In an earlier interview to CNBC-TV18, Singh had alleged the economy was running on only “one engine” of public spending. Singh’s comment came 10 months after he had predicted that demonetisation decision of 8 November 2016 would lead to a 2 per cent decline in GDP, providing experts a chance to point out how prophetic was the former PM.
Some voices against Modi and Union Finance Minister Arun Jaitley were also raised from within the BJP camp. In an article that dominated political-economic discourse in the country for weeks, senior BJP leader Yashwant Sinha attacked Jaitley for leading the economy to a “mess”.
“For quarter after quarter, the growth rate of the economy has been declining until it reached the low of 5.7 per cent in the first quarter of the current fiscal, the lowest in three years. The spokespersons of the government say that demonetisation is not responsible for this deceleration. They are right. The deceleration had started much earlier. Demonetisation only added fuel to fire,” Sinha had said.
However, even as debate over GDP data raged from television channels to streets, the prime minister as well as the finance minister held that fundamentals of the economy were “very” strong and the GDP would rebound. The latest GDP data prove them right. The GDP growth has sharply rebound to 6.3% in the second quarter (July-September).
“GDP at constant (2011-12) prices in Q2 of 2017-18 is estimated at Rs 31.66 lakh crore, as against Rs 29.79 lakh crore in Q2 of 2016-17, showing a growth rate of 6.3 per cent. Quarterly GVA at Basic Price at constant (2011-12) prices for Q2 of 2017-18 is estimated at Rs29.18 lakh crore, as against Rs 27.51 lakh crore in Q2 of 2016-17, showing a growth rate of 6.1 percent over the corresponding quarter of previous year,” Ministry of Statistics and Programme Implementation said in a release
In the first quarter, the GDP data of 5.7% was a three year low. Even as the pace of growth is far below from the 7.3% recorded in the same quarter last year, the increase recorded in the last quarter will have political implications in the upcoming Gujarat Assembly Elections. It will give BJP workers on the ground, including PM Modi, a reason to paint the opposition Congress as liars over the state of India’s economy. How Congress deals with the new barrage of attack after the release of the new GDP data remains to be seen. For now, Modi and rest of the saffron party leaders can take a deep sigh of relief.