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New GDP numbers 'too good to be realistic', say CEOs

76% respondents of Assocham's post-Budget survey find GDP numbers as 'too optimistic'

Press Trust of India  |  New Delhi 

The Associated Chambers of Commerce and Industry (Assocham) on Sunday said a large majority of chief executive officers (CEOs) and chief financial officers (CFOs) find the revised gross domestic product (GDP) data of over seven per cent growth as “too good to be realistic”.

In a post-Budget survey of 189 CEOs and CFOs, conducted by Assocham, as many as 76 per cent respondents said “They find the new data showing over seven per cent growth of GDP as too optimistic, as the underlying situation is not all that upbeat”.

In the survey, 71 per cent of the CEOs said “they would like to wait for some more time before they could be as optimistic as the government is about the new data”.

Besides, 68 per cent CFOs said the picture must “translate into solid sales and production data on the ground” and there was still some way to cover.

The industry body also said “there would be a certain amount of lag before we start seeing results on the ground” from various “path-breaking” steps announced in the Union Budget presented by Finance Minister Arun Jaitley.

Last month, the government released GDP growth figures based on a new methodology, under which it expects economic expansion of 7.4 per cent in the current financial year ending this month, while GDP growth rate of the previous financial year has also been revised upward to 6.9 per cent.

Under the previous methodology, the economy grew at 4.7 per cent in 2013-14, while the earlier growth estimate for the current financial year was 5.5 per cent.

Last week, Chief Economic Advisor Arvind Subramanian had also said the ambitious 8.1-8.5 per cent economic growth projected for the next financial year in the Union Budget is more like a “statistical and not a real number”.

In reply to a question on credibility of these GDP growth estimates, Subramanian had said the Budget was based on projections about nominal GDP growth, which is the sum of real GDP growth and inflation.

“Before the (revised) numbers came out, we were expecting a nominal GDP growth of 11.5 per cent. Broadly that was about 6.5 per cent of GDP growth and 4.5 per cent on inflation,” he had said.

Earlier, Subramanian had said he was “puzzled by the new GDP growth numbers”, while Reserve Bank of India Governor Raghuram Rajan had said last month he did not “want to say anything about the numbers until we understand them better”.

Quoting from its survey, Assocham said “even though the new data series may reflect the best international practices, the shift seems to be so sudden that at times, it looks too good to be realistic”.

“While sharing the upbeat mood reflected in the Budget, majority of India’s CEOs and CFOs would like the government not to base its optimism entirely on shifting to the new CSO series of the data on the GDP, as it is still early days for the new numbers to sink in and relate them to underlying figures of the old series,” Assocham said.

The business chamber said the industry was well aware about “how bad the previous financial year was in terms of growth, but the new numbers revise the fiscal 2013-14 GDP growth to 6.9 per cent”.

“Going by these numbers, close to seven per cent growth in the previous fiscal meant India never faced slowdown,” it added.

Assocham Secretary General D S Rawat said, “While a lot of path-breaking steps have been initiated in the Budget such as Micro Units Development Refinance Agency (Mudra) Bank for micro, small and medium enterprises, step up in investment in the public sector, boost to infrastructure, increased penetration of the pensions and insurance and the cut in corporate tax, there would be a certain amount of lag before we start seeing results on the ground.”

“(I am) not sure, whether the optimistic outlook as reflected by the new series has taken it into account.” Under the new series, the share of manufacturing in the country’s total GDP has gone up from 12.9 per cent to 17.3 per cent, making the sector look much better, it added.

First Published: Sun, March 08 2015. 23:45 IST
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