While most economic analysts, and now even the finance minister, are talking of a near-5% GDP growth for FY14, research just out from Standard Chartered suggests there is a happier possibility. The bank economists approach the situation from the old ASI-versus-IIP data where, past data shows, industrial production based on the Annual Survey of Industries (ASI) tends to be higher than that based on the Index of Industrial Production—ASI data which covers smaller firms, however, is normally available with a lag of over a year.
Having begun with the ASI-IIP comparison, the economists move to the GDP growth of various states. Since the states are what comprise the nation, the average growth in the GDP of various states should equal that of national GDP—there will, of course, be some difference since, for instance, deep-sea drilling for oil accrues to the Centre and not to any of the states. Even so, this can’t make that much of a difference and you find the two sets of data broadly converging in the past, with a difference of plus or minus 100 bps—in some years, the states’ average growth is 100 bps higher than the national, in some years it is the reverse. But in both FY12 and FY13, however, the difference has increased, to 200 bps for FY13. All of which suggests the possibility of FY14 GDP growth, along with that of some previous years, also being revised upwards—FY11 GDP, to give some perspective, began with 8.5% but got revised twice and is currently at 9.3%. While that’s a cheerful thought, pity those including policymakers in RBI who are coming out with policy actions based on data that could be completely incorrect.