Euphoria on GDP misplaced

True economic recovery is far away

The latest GDP numbers can be interpreted in two ways — the glass is half empty or half full. A seven-quarter record growth rate of 7.7 per cent in January-March 2018 does indicate that the economic recovery is happening, but this jump needs to be seen in the context of a low base effect of a mere 6.1 per cent growth in the preceding fiscal’s corresponding quarter. The figures for the full fiscal tend to dampen the euphoria of a single outperforming quarter. The Indian economy grew by a mere 6.7 per cent in 2017-18, significantly lower than the previous fiscal’s 7.1 per cent growth rate.

Robust growth in the agricultural, manufacturing and construction sectors could help the economy accelerate during this fiscal. The fourth quarter's robustness is also because of a significant rise in public expenditure. The government needs to consider policy changes to attract private investment. A disproportional share of government expenditure in the mix can derail the country’s fragile fiscal discipline. Data suggests that the growth of the job-generating services sectors has slowed — a matter of concern. Financial services are particularly affected because of the mounting non-performing assets. Management of the economy in an election year is a tightrope walk and the government has to find a balance between populism and economic prudence.