The numbers are rather optimistic.
Why do you say so?
Essentially you have the data for the first two quarters and a few others for the third quarter. By and large, the relationship between the first two quarters and the last two quarters is generated through the pattern observed in the past. This is fine if these are directionally the same. The problem arises because growth increased from one quarter to another quarter in the previous year. This time it declined from 8.2 per cent in the first quarter to 7.1 per cent in the second quarter. So I am not sure whether the serialised pattern that is used is justified. The second part is agriculture, which is estimated to grow by 3.8 per cent in FY19. The foodgrain production numbers available are not that high. The real change is in the allied sector. There the CSO is going by the target rather than any estimates. Targets are generally on a tad higher side than what they turn out to be.
Are you seeing similar surprises in the government-backed services as well?
The bulk of the community and social services is the government. And we do know the expenditures these days are front-loaded. I expect them to weaken in the last two quarters. When the second advance estimates come on February 28, I think these would be revised downwards.
What about the election year spending, which, everyone was saying, will give a boost to economic growth?
It will. I don’t know whether the CSO has factored that in. I don’t think it has. In fact, it expects private consumption to go down as share of GDP. That should pick up. Everything depends on when the general elections will be held and when parties will start spending. If the elections are held in April, the fourth quarter will see that effect. Basically, parties start spending two-three months before elections.
What impact will these two divergent factors have on economic growth? Do you still think the advance estimates are ambitious ones?
I think so. My sense is that it will be closer to 7 per cent.
Gross fixed capital formation is estimated to grow by 12.2 per cent in FY19 against 7.6 per cent in FY18. Who is driving this investment — the government or the private sector?
It has to be both. I think private investments are picking up a little bit. One of the things that also happens before elections is that greenfield investments are put on hold. We don’t know whether that will lead to weakening private sector investments in the last quarter. But it could be more than compensated by increase in pre-election consumption expenditure.
What explains manufacturing growth?
So far as manufacturing is concerned, about 75 per cent comes from filing on MCA21. What the CSO has used till now is for listed companies because the final data will come in October. One does not know if listed companies have done better than unlisted ones. If one goes by the sense that people have, one can say large companies have done reasonably well and small companies have not, even on the stock market. So manufacturing might weaken in the second advance estimates.