FE Editorial : Banning GDP
The Financial Express: Feb 12 2013, 00:11 IST
Gross capital formation, going by CSO’s latest estimate of what FY13 GDP is likely to be, has actually picked up pace, growing from 1.5% in FY12 to 3.9% in FY13. So why is it that, despite this, GDP is expected to grow just 5% this fiscal versus 6.2% in the last fiscal? While the halving of consumption growth and the slowing of exports has been a big factor, a large part of the explanation lies in the impact of various bans in sectors like coal and iron ore. In the case of the 1,06,000 MW of coal-based power, for instance, around 15% of current capacity is rendered useless due to lack of coal, something which Coal India has repeatedly said is a result of the current ‘go’ ‘no-go’ policy on mining. If that isn’t bad enough, another 43,000 MW of fresh capacity that is expected to come on stream by FY16 is also likely to function at just 40% levels based on current projections of coal production. In other words, India’s gross capital formation may show an increase, but the impact of this won’t show up in the GDP growth numbers as there is little or no extra output from this investment—indeed, the fresh investment will add to overall demand and, in the absence of a commensurate output increase, to overall inflation levels. In the case of power plants run on natural gas, over two-thirds of capacity has been lost due to unavailability of gas—while some part of this is
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