Finance minister Nirmala Sitharaman, earlier this week, gave us an inkling of the status of India's gross domestic product (GDP) growth. She commented that the country is not facing an economic recession, but a slowdown. As the minister admitted, India is going through an economic slowdown that we have been witnessing for quite some time. The official GDP figure for the September quarter, due later in the evening, may endorse the same. One of the reasons why economists are fairly sure about the outcome of the GDP estimates is that key components of the GDP have not been showing positive trends. Take a look:
One of the inputs that go into the calculation of Q2 GDP is the growth in agriculture production during Kharif season obtained from the Department of Agriculture, Cooperation & Farmer Welfare (DAC& FW). Crop loss due to excess rains could have an impact of the numbers here.
Abridged financial results of Listed Companies from BSE/NSE for the period to gauge the performance of companies are another factor that influences GDP growth. This has also not been spectacular.
The monthly accounts of Union Government's expenditure maintained by Controller General of Accounts (CGA) and the expenses of state governments maintained by Comptroller and Auditor General of India (CAG) for July-September will also count. This is one area where government can make a difference.
With the introduction of Goods and Services Tax (GST) from July 1, 2017 and consequent changes in the tax structure, the total tax revenue used for GDP compilation includes non-GST revenue and GST revenue based on GSTR filings as provided by Central Board of Indirect Taxes and Customs. The growth in GST collections is not as impressive as it used to be earlier.
Index of Industrial Production (IIP):
The IIP data is used to understand the growth in sectors such as electricity, mining, manufacturing etc. This could be a tricky number as the data for August at least had shown that country's factory output had actually contracted. If manufacturing and electricity output are in the negative territory, it will add strain on GDP growth numbers.
Private Final Consumption Expenditure (PFCE):
Private final consumption expenditure growth at constant prices during 2018-19 Q2 was 7 per cent; unless it exceeds that, which is unlikely, the growth here could also indicate a year on year slowdown.
A recap of June quarter
While the Q2 GDP of 2019-20 will be compared with the Q2 numbers of 2018-19, the immediate Q1 can also give a sense of what is about to happen. The Q1 2019-20 number in fact indicated that GDP at constant (2011-12) prices estimated at Rs 35.85 lakh crore, as against Rs 34.14 lakh crore in Q1 of 2018-19, had showed a growth rate of 5 per cent.
All these, and a host of predictions by agencies both private and public, suggest that the finance minister could be correct. The Q2 numbers could once again attest India's slowing growth.