Growth hopes too high?

It’s too early to rejoice over the Central Statistics Office projecting GDP growth at 7.6 per cent for fiscal 2015-16 despite low growth in the December quarter at 7.3 per cent — a four-quarter low. If the CSO’s projection is to become reality, fourth-quarter growth has to be 7.8 per cent. 

While it will be good if GDP grows at 7.6 per cent or even higher, as finance minister Arun Jaitley expects, it’s puzzling how this will happen as investments are down from eight per cent in September to four per cent in the December quarter, corporate sales are weak, exports down in real terms, contracting for the fourth consecutive quarter to minus nine per cent, agriculture grew by just 1.1 per cent and government spending is down at 4.7 per cent as it tries to meet the fiscal deficit target.

The December quarter saw manufacturing grow at a healthy 12.6 per cent, but that was primarily due to falling global commodity prices. Manufacturing can still support the fourth-quarter growth the CSO expects.

There’s a lot of hope that the government’s reform measures and the Make-In-India initiative will bolster growth. But the reality on the ground is still dominated by demands for more reforms, lower interest rates and simplification of procedures and processes, besides more sops in the coming Budget.

Interestingly, even RBI governor Raghuram Rajan noted during his recent credit policy announcement that the government will have to rekindle underlying growth drivers to place the economy on a higher growth trajectory.