T C A Anant, the Union government’s chief statistician, thinks global rating agency Standard & Poor’s (S&P) does not fully understand our economy’s structure, comprising a large unorganised sector as well. He tells Dilasha Seth industrial growth in April is not encouraging, but not disappointing. However, capital goods and mining continues to be areas of concern. Edited excerpts:
How would you react to Standard & Poor’s statement that India could be the first among BRIC members to see junk ratings?
S&P worries me. It has always been very pessimistic on India. Even when the growth rates were good, India’s ratings were much worse than others. It is partly because they find it difficult to read India. India is a developing country and is much more complex than other nations. They would like to sit in their particular perspective of the developed world, and we don’t quite fit in there
Why do you say that?
One way in which we don’t fit is the structure of the economy. We have a large informal sector and continue to have large dependence on agriculture, in terms of activities in the rural areas. Rural size is still very large. This makes it very difficult for them to read our economy. On the one hand, we have the characteristics of a very strong and organised modern economy, and we also have the unorganised rural economy. We have internal strengths which are different from other countries.
April is the beginning of the financial year and it is partly a reflection of how aggressively companies booked production in March to shore up year-end figures. This is one major reason why one should also look at IIP (Index of Industrial Production) numbers in a seasonally adjusted form. It is not difficult to do it. My guess is if you adjust it seasonally, it will not look as disappointing as 0.1 per cent.
You mean the numbers are not disappointing?
In April 2010-11, IIP growth was 13 per cent, in April 2011-12, it was five per cent, so definitely there is a slowdown. The fact is 5.3 per cent growth in April was continuation of the robust growth in March. This time, we had contraction in IIP numbers in March. Given that, I don’t say April numbers are great, but I would also say, these were not that disappointing.
The capital goods component in the IIP is consistently negative for the past few months, barring February. What needs to be done to revive it, as it is bringing down the overall numbers?
Capital goods continued to be negative. It is an issue of concern. But there is a bigger story underlying this. Consumer goods is holding up to a pattern it has shown in the past year or so. It is 5-5.5 per cent. But capital goods have been coming in negative since October, barring February.
So, the capital goods index as a whole is coming poorly and over the year, it has done much poorer than what it did in 2010-11, indicating there has not been enough activity in the investment side, which is necessary for long-term growth.
Mining, too, continued to contract. What could be the reasons?
Mining growth has been negative for almost a year. Partly because of gas, earlier it was coal, but that has improved. So, mining continues to remain an area of concern. However, the principal component of concern is capital goods.