The change of base year would necessitate the same changes for assessing the industrial growth. Also, conversion of the old series of national income on the new base year should be made available early
The New Year starts with a series of events with far-reaching implications for the industry. The allotment process of coal mines through e-auction is at last commencing shortly. It is likely to be followed by the allotment of iron ore mines. The regular drop in global commodity prices puts pressure on correcting the domestic prices also as there is little justification to continue with import. The General Budget a few days later is eagerly awaited with huge expectations on investment, policy reforms in specific sectors, restructuring of subsidy framework, fiscal goals and GST dates.
There is a renewed thrust on reviving the manufacturing sector by publicising Make-in-India campaign. To take it forward, the implementation of mega projects in roads, railways, ports, infrastructure and communications require massive investment, a large part of which can flow via FDI and PPP routes that require policy changes.
Further opening up of the economy in various segments must be based on a pragmatic view of the domestic players’ competence and investment already committed to augment capacity in specific sectors. This balancing act of encouraging the efficient and cost-competitive domestic players, while inviting foreign participation in sectors needing funds for technological upgradation and operational efficiencies is to be accomplished jointly by the various arms of the government in consultation with each other. The concerned state governments are also invaluable partners in this dialogue.
Last week the government came out with the set of corrected GDP, saving and investment numbers of the past 3 years based on revision of the base year from 2004-05 to 2011-12. Between 2004-05 and 2011-12 the new data sets on the emerging sectors reflecting the dynamic changes in the economy needed consideration and it was increasingly felt that National Accounts estimates of the country need to be aligned with the global standards for fair comparison. Thus GDP at market prices (current and base prices) would replace GDP at factor cost (followed by India) and industry-wise GDP estimates would appear as Gross Value Added (GVA) at basic prices in conformity with international standards. Accordingly, GDP for 2012-13 (at constant prices, base: 2011-12) is revised to 5.1% (against 4.5%) and for 2013-14 the new GDP shows a growth of 6.9% (against 4.7%).
It is seen that the GVA (at constant prices) for manufacturing has grown at a lesser rate (5.3%) in 2013-14 as compared to 2012-13 (6.2%). Although manufacturing has shown a marginally positive trend in November 2014, it is to be seen if the tempo is maintained in the remaining months of the current fiscal so as to exceed growth rate of 2013-14. For this to happen, the brighter aspects of growth related parameters discussed above would play a dominant role. The highest growth achieved by trade and repair services (14.3%) as well as communication and services (13.4%) indicates the increasing contribution of tertiary sectors to GDP growth.
It is interesting to note that Gross Capital Formation has not shown any increase in 2013-14 resulting in lowering of its share to GDP. However, the rate of capital formation exceeded the rate of saving in the economy and the gap (1-2.8%) was filled up by net capital inflow from abroad. The data also throw up the increasing role being played by non-financial corporations in mobilising household savings.
The change of base year would necessitate the same changes for assessing the industrial growth. Also the conversion of the old series of national income on the new base year should be made available early. Hopefully, the release of estimates on national economy for the full year in the next week would bring further cheers to business sentiments.
The author is DG, Institute of Steel Growth and Development. Views expressed are personal.