The government's chief statistician says Gross Domestic Product growth might be revised upward after the total gamut of indirect tax collections becomes clear.
Economic growth, he felt, was firmly back after deceleration to 5.7 per cent in the first quarter of the current financial year, lowest in the Narendra Modi government's tenure till then. The outlook, he said, was bright.
"With the indirect tax regime now dominated by the Goods and Services Tax (GST) regime, the statistics department had to change its assessment methods," said T C A Anant, the chief statistician, at a press conference.
Adding: "Since we've had to use proxies for sales tax collection estimates, it might be that when revised figures for indirect tax collections are released, GDP figures might go up. Indirect tax collections are actually higher this year."
Indirect taxes, net of subsidies, are added to convert gross value added, a summation of agriculture, industry and services, to GDP.
For the second quarter of the current financial year, also first three months of the GST rollout, Centre and states collected around Rs 2.75 lakh crore, slightly more than the targeted Rs 2.73 lakh crore.
Anant also noted that restocking as a result of the GST regime had not yet made a mark on the economic plate. "It doesn't appear that inventory accumulation has led to GDP increase in Q2 (July-September). But, it will remain in Q3 (October-December), as firms increase production in anticipation of more sales during the festive season."
Anant also reiterated that growth is firmly back, saying economic decline had worked its way out of the system and the current trends would continue over the coming quarters. Manufacturing growth rose to seven per cent, after the low 1.2 per cent rise the previous quarter.
In the second quarter, the rate of capital formation remained below 30 per cent, a trend for a third quarter in a row. The latest figures show gross fixed capital formation was 28.9 per cent. Anant had earlier said this figure has to be much higher to significantly set into motion long-term investment growth.
This time, he said private expenditure needs to ramp up. "Capital formation estimates also show government expenditure has been robust, while that on the private sector has remained weak."
On the agricultural sector's low 1.7 per cent growth, Anant blamed the monsoon, which he said had been not been as good as last year. He refused to attribute the figures to the lingering effect of the government's demonetisation drive.
"My judgement is that what demonetisation was will be very hard to read from GDP numbers," he said. Adding that informal credit might have taken the place of cash transactions in rural India.
"Normal trading practises and a lot of trade in India, particularly in the informal sector, is relationship-based. In this way, because of relationship networks, cash transactions can also be substituted with informal credit. My suspicion is that a lot of the claims of the impact of demonetisation on agriculture simply does not account for the presence of such relationships in the sector."
Among the sectors, construction registered the lowest growth, at 2.6 per cent. Anant attributed this to ongoing structural realignment.