The average Indian now earns Rs19,649 per annum, up 6.1 per cent from Rs18,517 in 2003-04 — and in terms of 1999-00 prices.
NEW DELHI: The Indian economy is bigger than we thought, and Indians are earning more, saving more, and investing more.
Thanks to a change in the base year for estimating gross domestic product (GDP) from 1993-94 to 1999-2000, 2005’s growth figure has increased from 6.9 to 7.5 per cent.
The average Indian now earns Rs19,649 per annum, up 6.1 per cent from Rs18,517 in 2003-04 — and in terms of 1999-00 prices. In today’s money, the earnings would be more.
Looking at the crowds thronging malls, it may not look like Indians are saving much, but the overall gross domestic savings rate was 29.1 per cent of the GDP in 2004-05. That’s higher than the 28.9 per cent reported in 2003-04.
The saving is aiding an investment boom. Gross capital formation — a measure of money that’s being invested in capital assets — was 30.1 per cent in 2004-05 against 27.2 per cent in 2003-04.
The base year change — a periodic affair — helps take into account structural changes in the economy and presents a truer picture. Services now account for 53 per cent of the economy, and industry 27.3 per cent. Agriculture has dipped to 19.6 per cent.
All this was reason enough for a beaming Finance Minister P Chidambaram to call a press conference and announce that he is confident of the economy logging 7.5 per cent growth in 2005-06. But he admitted that the challenge of maintaining high growth on this high base is tougher.
Chidambaram claimed the zing in the economy was the result of “prudent fiscal policies, inflation control by the Reserve Bank of India, and more efficient implementation of projects”.
But he qualified that by saying, “The government is only a facilitator. People have caught on to the idea that hard work and efficiency is the road to prosperity.” He called the rising savings rate the most heartening feature of the economy.
“We are nearing the takeoff stage,” exulted DH Pai Panandiker, president, RPG Foundation. The takeoff stage will come when the savings rate crosses 30 per cent, he said.
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