Editorial: True picture of growth

Such has been the authenticity of statistics released by the BJP-led Union government that economists quickly cleave into two over them. So it has been with the latest GDP growth data put out last week, showing an annual growth rate of 7.2 per cent for the full fiscal year 2022-23 and 6.1 per cent for the January-March quarter.

Statistics allow you to read what you want into the figures, and so the government has come out crowing that India is now the fastest growing nation in the world, bar Saudi Arabia. It might well be, given that Europe has been hobbled by war, China by Covid-induced dormancy and the US by high inflation. However, while optimism is not to be carped about, it must be tempered with the fact that post-COVID recovery seems impressive because it comes off a really low base recorded in that first horrendous year, 2020-21. If we considered only the post-COVID years, the annual average growth rate would be a sobering 3.28 per cent.

Three years on, the effects of COVID are still palpable in the figures for 2022-23, and it’s fair to say the government has imparted no especial momentum to accelerate the recovery. The robust figures put out last week have been better than anticipated but are considerably buoyed by the return to full capacities in the services sector, especially in the tourism, hospitality, logistics and insurance segments, which were the last to join the recovery.

Similarly, after taking the worst hit in the punishing lockdown of 2000-21, the manufacturing sector rebounded with a growth rate of 4.5 per cent in the latest quarter, which again is to be seen against a low base effect. This recovery is mainly to global moderation in input costs. Additionally, the construction sector clocked an impressive double-digit growth of 10.4 per cent in the latest quarter, despite the interest rate hikes.

Growth rate figures are a bit like the weather: The print says something but it feels like something else. So, while the 7.2 per cent growth rate sounds impressive coming off 9.1 per cent in the preceding year, the high unemployment print begs the question: so where are the jobs? The latest unemployment rate stands at 8.11 per cent nationally and 9.8 per cent for urban India. The lowest it has been for urban workers during fiscal 2022-23 was 7.3 per cent back in June 2022.

This tale of a post-COVID bounce and high unemployment and signals of social distress can only be characterised as a lop-sided recovery. We have a heap of evidence of widening inequalities and absence of demand for FMCG goods. Future figures are likely to be challenged by the waning of the pandemic effects and the kicking in of lag effects due to high interest rates. The momentum is likely to moderate in the current fiscal year due to the normalisation of the base effect and absence of fresh demand for discretionary goods and services. Considering these factors, experts predict a more modest 6.1 per cent growth in FY24, which, if achieved, would be welcome if it restored manufacturing to a semblance of vigour, and generated jobs to absorb the thousands of young men and women coming into the work force.