The most important takeaway from the new GDP numbers (6.9 per cent growth in 2013-14) is that the economy has not been as bad as it had been painted all along. It implies a complete redrawing of the picture of the economy. The problem remains, though, because the GDP numbers do not tie well with the other independently available data.
If industrial production has grown so well, then why has credit offtake not reflected it? If we say the mining sector did not see such a substantial fall, then how do we explain the fall in gas production or iron ore production and the fall in commercial vehicles production? So, I don’t think it is going to be so easy for us to so quickly consume the new GDP numbers. It’s a bit of a challenge.
There is no doubt that a new base year should be chosen and the number should be in line with international practices. The challenge is in making sense of the new numbers along with every other number that we have. They do not mesh. So do we believe in the new GDP numbers or the other parameters? If you believe the GDP numbers, then one should say that the economy was not doing as badly as the rest of the numbers were making it look like. The problem here is that the markets are too used to looking at just a few set of numbers and drawing inferences from them far too quickly. So we are on thin ice when using these statistics.
Using these sets of numbers requires a greater body of expertise in consuming this information. The breathless analyses that happens without generally worrying about how reliable the number is, is one of the problems I see. The problem is not with revisions and corrections but our inability to wait and think about what the numbers are saying. The rapid fire inference drawing and the quick opinion making are the dangers. This mostly emanates from opinions being created largely in the financial markets, rather than by economists.
I am committing the same crime I am warning against. I prefer to go by my capex data, the prowess data and the consumers’ pyramid data on which I have better control, and can get a better sense of where the economy is heading at least in some cases. The current Sensex is a reflection of industry expectations—on that there is no doubt. The economy is in a better shape so the revision in data indicates that the expectations in the Sensex are at least partly justified. What was not justified was the lacklusture performance for a long time. The cso has given us a lot of work to do....
Mahesh Vyas is CEO, CMIE; E-mail your columnist: mahesh [AT] cmie [DOT] com
