Q&A: Pronab Sen, Principal Advisor, Planning Commission

'Tough to fix firm number on growth'

As India’s GDP growth fell to nine-quarter low of 6.9 per cent in July-September period this fiscal, all eyes are on the economic expansion going forward in 2011-12. Pronab Sen, who is principal advisor in the Planning Commission, tells Sanjeeb Mukherjee that it is difficult to pinpoint the exact GDP number for the current fiscal, as IIP data is questionable and contradicts with exports growth story. Excerpts:

The GDP growth fell to its lowest in nine quarters to 6.9 per cent in April-June period of this fiscal. In this scenario does 7.5-8 per cent growth look possible for 2011-12?
Well, if you ask me on the way IIP (index of industrial production) is behaving, it looks to be lower. At the same time, it is difficult to predict a firm number on what is going to happen. For, quarterly GDP numbers are based largely on IIP numbers. So IIP is suggesting a slowdown, but exports, nonetheless, are growing faster. This is contradictory to the IIP. I am actually not very sure how the full-year GDP numbers will look like, as export and import growth suggests much different economic growth numbers than the GDP numbers suggest. It is difficult to predict any number as there is discrepancy in data.

Manufacturing numbers are bad, growing by just 2.7 per cent in the second quarter. How do you read this?
Rising export data shows there must have been a strong growth in engineering, which is part of manufacturing. Hence, I say that the IIP data is questionable. The quarterly GDP data is very heavily dependent on the IIP, as the IIP numbers form part of not only the manufacturing part of the GDP, but also the investment part.

Do you see an impact of high interest rate on manufacturing?
High interest rate does have an impact on manufacturing. Corporate investment is down, while SME investment is up, so is white goods consumption, too. Hence, it would be wrong to say that high interest rates are having a uniform impact on manufacturing.

How do you read the mining numbers in this GDP, which contracted to 2.9 per cent in Q2. What is way forward since it is not impacted by high interest rates?
Well, the mining numbers are down, purely on the basis on KG basin. Going forward, it will largely depend on KG basin in the next two quarters.

In the next two quarters, how do you see the general performance of investment, given all the talk of policy paralysis?
All of us are not willing to accept something called cyclical nature of business and investment. They are falling due to downside cycle of business. I believe that the cyclical impact won’t change much in the next two quarters. All the same, there won’t be a sharp downside.