India's fourth quarter gross domestic product (GDP), at 7.5 percent from 6.6 percent in the third quarter, has not had economists jumping with joy. Most are cribbing that gross value added (GVA) has been consistently slowing down at 6.6 percent in the third quarter and 6.1 percent in the fourth, as a proportion of GDP.
Economists scoff at GDP data
These economists say GVA is a better indicator to assess country's performance as GDP is GVA plus taxes. And in the fourth quarter GDP at 7.5 percent was much higher than GVA only because of the increased indirect taxation on fuel prices.
Brokerages believe that real activity or GVA actually slowed on account of poor agriculture output that contracted by 1.4 percent on a y-o-y basis. Also large squeeze in government consumption by 7.9 percent to meet the fiscal deficit target, saw just a 0.1 percent growth in public services like education and health.
Agriculture may continue to disappoint this year as well and if divestment is not successful, government may cut spending again.
“We do not expect any great increment coming from agriculture sector because it looks like the monsoon outlook for this year is also quite clouded. So, even if the overall rainfall is close to normal, the distribution could be skewed,” A Prasanna, Economist, ICICI Securities Primary Dealership told CNBC-TV18.
“I would still point out that there is a huge divestment target that this government has and suppose they are not able to achieve it perhaps that pattern could get repeated this year also,” he said. Growth: All is not well
Besides agriculture and government spending, poor global demand may also hurt exports and hence India's GDP, say several economists.
But not all brokerages are pessimistic. In fact there is a clean split visible. Brokerages like Nomura, Edelweiss and care expect an 8 percent GDP growth, while JPM, BOAML and Macquarie expect growth to be more like 7.5 percent.
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