Comment | GDP does not stand for ‘Grossly Distorted Picture’

Here are some initial observations on the brand new Gross Domestic Product (GDP) data for 2016-17 and 2017-18:

1. Firstly, those who are sceptical of the new numbers would do well to heed the advice of Samuel Taylor Coleridge, celebrated poet and opium addict, who coined the phrase ‘willing suspension of disbelief.’

2. The real GDP growth rate for 2016-17, the year of demonetisation, has been revised upwards from 7.1 percent to 8.2 percent. Growth in the previous year was 8 percent. So growth in the year of demonetisation was higher than in the previous year. Wiping out most of the public’s cash holdings seems to have had no negative impact on growth. Perhaps we should do it more often.

3. The Modi government now has two years of GDP growth above 8 percent, in contrast to one year during UPA-II. Average growth under the Modi government also goes up even more, beating the UPA-II record handsomely. According to the government’s GDP back series, average GDP growth during the UPA-II years was 6.7 percent. The first four years of the Modi government now have average GDP growth at 7.7 percent. It really is no contest, according to the data.

4. GDP growth reached a high of 8.2 percent in the year of demonetisation and then fell to 7.2 percent in 2017-18. The introduction of the Goods and Services Tax (GST), rather than demonetisation, is no doubt to be blamed for slower growth.

5. The only dark cloud is that, if we take the advance estimates for 2018-19 and the new GDP numbers for 2017-18, then real GDP growth for the current fiscal year works out to a mere 5.9 percent. That is a disaster and would make us lose the much-vaunted tag of the world’s fastest-growing large economy. We urgently need the GDP estimates for the current fiscal year to be revised upwards too.