5 per cent growth rate projection ignores rising trend in economy: Montek

New Delhi:  Questioning the methodology of Central Statistical Office (CSO) in computing economic growth projections, the Planning Commission today said it has ignored the rising growth trend while working out estimates for 2012-13.

"I am not certain that whether they (CSO) have done it in a correct way. In the past also, the quarterly (GDP) data was very frequently adjusted," Planning Commission deputy chairman Montek Singh Ahluwalia replied when asked about CSO's advance growth projections.

According to CSO's advance estimates of GDP growth for 2012-13, economic growth is estimated at 5 per cent as compared to 6.2 per cent last year.

The economy grew by the 5.4 per cent in the first half of this financial year (April-September).

Elaborating further, Mr Ahluwalia said, "I get the impression that they (CSO) have not actually addressed the question ... could it be that the (decline in the) economy bottomed out, in that case straight forward linear projection would not be right."

"I think it (growth projection of 5 per cent in 2012-13) is very low. I have been told that CSO has taken data from April to November (2012-13) and they just projected it (advance estimates)," he added.

Explaining further that the GDP growth for 2010-11 was recently revised from 8.4 to 9.3 per cent, he hoped that it may happen to 2012-13 estimates also.

When asked even 5 per cent economic growth projection for 2012-13 is over-stated, he replied, "I don't think so. They underestimated 2010-11. When they raised that to 9.3 per cent, then 2011-12 figure fell to 6.2 per cent."

"I don't think that they even have full data for November (2012). They have some production data and some credit data. I dont think that it is very reliable way of looking at the situation," he said.

About the rise in per capita income for 2012-13 to Rs 68,747 as compared to Rs 61,564 during 2011-12, he said, "The rise in per capita income is simply because earlier economic growth rates were higher (in 2010-11 and 2011-12).

On tweaking the annual average growth rate target for 12th Plan in view of these advance estimates, he said, "It (the growth in 2012-13) will certainly be below 6 per cent. I think nobody has doubt about. But I would not change the average annual growth rate target (of 8 per cent) in 12th Plan."

While the Reserve Bank of India has projected growth rate of 5.5 per cent for the current financial year, the International Monetary Fund (IMF) has pegged it at 5.4 per cent.

The Finance Ministry had earlier reduced the growth projection for the current fiscal year to 5.7-5.9 per cent from the original estimate of 7.6 per cent.

With a view to promoting growth, the RBI in its quarterly policy review last month lowered the key lending rate by 0.25 per cent and reduced the cash reserve ratio (CRR) by the same margin, releasing Rs 18,000 crore or primary liquidity into the system.

When asked about the possibility of further lowering of interest rate to boost growth, RBI governor D Subbarao, who is in Guwahati for board meeting, said: "We got to know about the CSO projection. We will take that into account as and when we make our next policy... I am unable to comment on rate cuts at this forum."

The latest estimate of 5 per cent for the entire fiscal year means that the pace of economic expansion has slowed sharply in the second half of 2012-13, given that GDP growth in the April-September period stood at 5.4 per cent.

This estimation, however, has been objected by the Planning Commission deputy chairman who said: "I am not certain that whether they (CSO) have done it in a correct way. In the past also, the quarterly (GDP) data was very frequently adjusted."

According to Mr Ahluwalia, the CSO ignored the uptrend in growth towards the second half of the fiscal year while computing the data for the whole financial year.

The data suggests that services sector including finance, insurance, real estate and business services sectors are likely to grow by 8.6 per cent this fiscal year, against 11.7 per cent last fiscal year.

On the positive side, mining and quarrying is likely be slightly better at 0.4 per cent, compared to contraction of growth of 0.6 per cent a year ago. Growth in construction is also likely to be 5.9 per cent in 2012-13, against 5.6 per cent last year.


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