Base effect: GDP may get statistical boost due to weak FY13 growth

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Indian economy is widely expected to register sub-5 per cent growth in the current fiscal. Indian economy is widely expected to register sub-5 per cent growth in the current fiscal.
SummaryWhile manufacturing continues to post weak growth, services sector registers mixed growth.

The economy, which is widely expected to register sub-5 per cent growth in the current fiscal, may get a slight statistical boost due to the lower-than-estimated GDP growth in FY13.

“Based on the first estimate of national income for FY13, some of the indicators for the current fiscal’s growth numbers are being revised. There will be some impact through the lower base effect, but it will be limited,” said a senior government official, who, however, warned that absolute numbers of GDP are more critical.

While manufacturing and mining have continued to post weak growth, services sector has registered a mixed growth. Agriculture is expected to be the only silver lining in the GDP estimate for 2013-14, the official said.

The Central Statistics Office (CSO) will release advance estimates of GDP for FY14 on Friday. Data released last week by the CSO had revealed that the economy expanded at the slowest pace in a decade at 4.5 per cent in 2012-13 as against the earlier forecast of 5 per cent.

“One does not know what the impact of the base will be, but I expect GDP growth in FY14 to be around 5 per cent,” C Rangarajan, chairman, Prime Minister’s Economic Advisory Council had told The Indian Express.

The advance estimate of national accounts is a crucial input for the Budget and is based on indicators such as index of industrial production and agriculture forecasts.

The GDP estimate is used by the finance ministry for its projections on revenue collections, fiscal deficit and other indicators.

“Our projection was 4.8 per cent for FY14 but growth may be around five per cent since last fiscal’s GDP data has been revised downwards. But there will be continued weakness in consumption and investment,” said DK Joshi, chief economist, Crisil.

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