Welter of GDP estimates is foxing

First, the good news. The quick estimates on national income and related aggregates, issued by the Central Statistical Organisation suggest that India, during 2005-06, was one of the fastest - if not the fastest - growing economies in the world.

But the flip side is that the CSO  is cryptic when it comes to explaining how the real gross domestic product, originating from the agricultural sector, registered a leap of 6.0% in that year.

Its earlier projection released in  May 2006 had indicated this increase much lower at 3.9%, while its advance estimate of February of that year had pegged the growth rate even lower at 2.3%.

Given the magnitude of GDP, even a fractional change makes a huge difference and when the revision is more than three full percentage points, it does radically alter the big picture.

More fundamentally, is the CSO overtaxing itself by coming out with a series of GDP forecasts during  the year - advance, revised, quick, provisional and final - when it has already in place a system of quarterly publication of this key information.

This is not much ado about nothing. For over decades, the quick estimates of national income were the most eagerly awaited data from the government, made available for any year when the next fiscal was nearing or in its final quarter, and a few weeks ahead of the budget.

Now, this is an exercise in redundancy. This is because, the CSO is now disseminating these statistics every three months and even the time lag which used to be three months is not reduced to two months.

So, much so that when this institution released the figures for 2005-06, it had already placed in the public domain, similar statistics for the first two quarters of the current fiscal.

In other words, we are privy to the GDP particulars for all the quarters of 2005-06 for which it has now come out with its quick estimates, preceded by revised and advance estimates.

If at all, a consolidated account of the GDP and other related statistics for any year is needed, the quarterly data already out, can be updated and released towards the final quarter of the following year.

But, what is of greater concern is that, with the attention almost entirely riveted on the real GDP growth rate during 2005-06, even the informed public have overlooked some other vital facts.

Even as the nation is in a celebratory mood over the robust showing by the economy in the last fiscal - which is certain to be repeated this year too - there is also reason to be elated when we focus on the trend in saving and investment. CSO data reveal that both the rate of gross saving and capital formation had peaked in that year -to 32.4% and 33.8% respectively.

The trend in both is upward in the recent past and the spurt is significant considering the fact that the rate of saving was only 23.4% in 2000-01, while the rate of investment was only 24%.

A disturbing fact, highlighted by the CSO’s latest national income release, is that, both the household sector and the private corporate sector had reported a big jump in net savings  — the former from Rs 3,47,167 crore in 1999-00 to Rs 6,51,272 crore in 2005-06 and the latter from Rs 42,694 crore to Rs1,79,310 crore - the public sector wallowed in dissavings; its net savings were  in the negative territory, though over time, this had tended to decline - from (-)Rs91,648 crore to (-)Rs52,973 crore.

Another interesting fact is that the share of the public sector in real GDP has declined sharply to 22.1% in 2005-06 from 25.6% two years ago.

There was a quantum jump in the receipts of the public authorities with a near-doubling of indirect receipts to Rs 4,32,868 crore last year and a 174% surge in direct taxes to Rs1,72,611 crore.

But, despite the buoyancy in receipts, expenditure also continued to be on the boil with interest on public debt and subsidy payments showing a strident increase to a whopping Rs 1,81,196 crore and Rs1,16,623 crore over a short period of six years from Rs 93,329 crore and Rs 56,067 crore.

Consequently, the net saving of the administrative departments was negative.

Perhaps, the most distressing aspect of the numbers contained in the CSO data is the disquieting pattern of structural changes in the economy in that the share of the commodity-producing sector in GDP has declined from 49.7% in 2000-01 to 45.9% in 2005-06 with a corresponding rise in the share of the service sector from 50.3% to 54.1% with a setback noted in both manufacturing and agriculture.

While the trend in overall economic growth rate is indeed impressive, there are disquieting elements which cannot be ignored.