New GDP data not in sync with real economy; sectors grew faster under UPA

The recent downward revision in gross domestic product (GDP) at constant prices in the years prior to 2010-11 is in divergence with the data from the real sectors. 

GDP under the National Democratic Alliance (NDA) grew at an average of 7.3 per cent in the last four years, compared to the 6.7 per cent growth rate during the last nine years of the United Progressive Alliance (UPA) — calculated using the new back series data released by the Central Statistics Office on Wednesday.

This, however, contrasts with the growth rate in the real sector data under the two governments. For example, Corporate India’s combined revenue grew at a compound annual growth rate (CAGR) of 18.9 per cent between 2004-05 (FY05) and 2013-14 (FY14), against 5.2 per cent growth under the NDA. 

The growth rate gap in corporate earnings is even starker. 

The combined net profit of a constant sample of 799 listed companies grew at 13.2 per cent CAGR under the UPA, while it shrunk at an annualised rate of 1.8 per cent in the last four years. 

Corporate India grew at 2.7 times the underlying GDP growth rate during the UPA years, and the multiplier declined 0.7x during the NDA. 

The broader stock market also performed better under nine years of the UPA than in the last four years. BSE Sensex appreciated 14.7 per cent annually between FY05 and FY14, against 10.2 per cent a year in the last four years. 

Similarly, private sector capital expenditure, too, has decelerated sharply, from 20.5 per cent a year under the UPA to 8.7 per cent under the current dispensation. This reflects in the non-food credit growth of the banking sector, which expanded at a CAGR of 21 per cent during FY05-14, against 9.8 per cent in the last four years.

There has been a similar slowdown in India’s foreign trade in the last four years, despite acceleration in GDP. Non-oil merchandise exports grew at a CAGR of 14.1 per cent during FY05-14, against 1.4 per cent annualised growth in the last four years. 

The tax buoyancy, both at the central and state level, was also greater during the term of the previous government.

Indirect tax collection is the only parameter where the NDA government has performed better than the UPA. The central government’s indirect tax revenues grew at a CAGR of 15.7 per cent in the last four years, against 12.1 per cent CAGR during the UPA years. 

Analysts, however, attribute it to a sharp upward revision in excise duty on petroleum products in the last four years rather than higher production in the corporate sector.