Modi Government inherited an Economy on the way up, & in turn has brought it down
The Finance Minister, Shri Arun Jaitely, when presenting the latest numbers on the GDP, said that the growth was very reasonable and played down the impact of the Demonetisation. But, even the briefest glance at the data reveals a very different picture. It shows that the Indian Economy has taken a big hit. India’s Gross Domestic Product grew at a mere 6.1% in the 4th Quarter of the Financial Year, 2016-17. Despite this, the Central Statistical Office still pegged the GDP growth at 7.1%.
By the new method of measurement, the Gross Value Addition, the figures have gone from 7.9% in 2015-16 to 6.6% in 2016-17. This is a decline of nearly 1.3%, and vindicating the position maintained by the Congress party that there would be a significant decline of in the GDP growth in the wake of Demonetisation in November.
The Quarterly data shows that the Economy was indeed slowing in the middle of 2016 across a variety of sectors. It needed the Government to take corrective measures and bold reforms. What we got was a Government decision based on the whims of one man, which, in one swoop, took away 86% of the currency in circulation. This foolish decision was a setback to the economy and plunged millions into misery.
Private Consumption fell from 11% in Q3 of FY17 to 7.3% in Q4 of FY17. Investment demand fell consistently across 2016 from 7.4% in Q1 of FY17 to -2.1% in Q4 of FY17. Industry and Services fell from 7.4% and 9.0% in Q1 of FY17 to 3.1% and 7.2% respectively.
Construction sector witnessed a contraction and declined by 3.7%. Manufacture sector halved from the First Quarter to the Last Quarter to 5.3%. Financial, Real Estate, and professional services sectors growth went from 9.4% in the First Quarter to 2.2% in the Last Quarter.
While individual sectors are down, more worryingly the three most important indicators of a vibrant economy are completely down.
- Investment to GDP Ratio slowed sharply in FY17 to 2.4% from 6.5% a year ago.
- Credit Growth has been the lowest in 60 years.
- The latest data shows that nearly 1.52 lakh jobs were lost due to Demonetisation.
The entire growth for 2016-17 was supported by Government consumption, without which we would have seen a far more dismal picture. Reports have shown that investment shrank in absolute terms in 2016-17.
The Economy which the Government inherited was recovering. India had weathered the storm and was looking forward. The Modi Government had the luxury of global commodity prices easing and the Indian GDP slowly rising once again. They were further buoyed by a sharp fall in international oil prices, which continues even today. The stark reality is that the Modi Government inherited an economy on the way up, and in the last 2 and half years they have brought it to a virtual grinding halt. People are not investing, the youth are not getting jobs, the Opposition’s pointed questions are ignored and the Prime Minister is busy celebrating.