ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Some Puzzling Features of India's Recent GDP Numbers

An analysis of the end-November 2015 data release of the Central Statistics Offi ce raises some issues that must be kept in mind while discussing the state of India's economy. If past trends are anything to go by, economic growth in 2015-16 will not improve in the last quarter as some seem to hope. The movements in the GDP defl ators and the very odd behaviour of a gradual decline in the investment rate together indicate that growth in 2015-16 will not end as earlier forecast.

Surge in Union Government Revenues

The tax revenues of the union government have surged in the first half of 2015–16, growing much faster than budgeted. Indirect taxes led the rate of growth of tax revenue collections, while direct tax collections grew less than expected. Though higher revenue is welcome, indirect taxes are nonetheless regressive, and higher indirect tax revenue will only accentuate income inequalities in India.

Are Corporates Overleveraged?

There is concern that corporations have borrowed too much, and that therefore bank balance sheets are strained as well. Contrary to this popular view, it is argued here that the company finance data of the corporate sector in general does not suggest that this is so.

Gross Value Added

To estimate gross value added for the manufacturing sector, the 2011-12 National Accounts Statistics series follows the "single deflation" instead of the "double deflation" method. In this note, it is argued that the double deflation method estimates come closer to the Index of Industrial Production growth estimates, and that this reinforces the view that gross value added of manufacturing is overestimated in the 2011-12 series. This has an impact on overall GDP growth numbers, which too end up lower than in the new series.

Private Corporate Sector in New NAS Series

Revisiting the MCA-21-based estimates of the size of the private corporate sector in the rebased National Accounts Statistics, it is argued that the use of a single blow-up factor for non-government non-financial public and private limited companies could be leading to an overestimation of gross value added and gross savings. If there has to be a blow-up, it should be done separately, given the distinct characteristics of public and private limited companies.

Investment Revival

An analysis of bank lending rates suggests that reducing the lending rate, while important, may not be as critical to reviving investment as it is made out to be. The three interest rate regimes followed over the last two decades or so are compared here and it is found that the current base rate regime is by far the most stable, and is one which reduces uncertainty of interest costs.

New Estimates of Saving and Capital Formation

The new series of national accounts statistics raises the estimates of saving and investment, but it also reconfi rms the trend of a decline in domestic saving and capital formation in recent years. Analysing available data, this note attempts to understand the statistical differences in how saving and capital formation are measured in the new series.

GDP Sectoral Growth Rates

An analysis of the new 2011-12 series of National Accounts Statistics to understand the trends of GDP growth and the sector-wise break-up. Data up to the advance estimates for 2014-15 are explored. The service sector continues to lead growth, manufacturing shows a revival, while agriculture has once again slowed down.

Recent Trends in Inter-Sectoral Terms of Trade

Revisiting an old debate about terms of trade of agriculture vis-à-vis other sectors in the Indian economy, it is argued that the ToT of agriculture has remained favourable for a large part of the post-liberalisation phase, with it being most favourable since the mid-2000s. This is despite rising costs of production, high rural inflation, and rising human labour costs. It is further argued that large farmers seem to have benefited the most from the favourable ToT, which helps understand the narrowing inequality between rural and urban India, along with rising inequality within rural India.

Foreign Exchange Spending and Earning of Corporates in India

An analysis of corporate sector earnings and spending reveals that since liberalisation in the early 1990s, Indian companies have become increasingly dependent on foreign inputs, while foreign companies operating in India continue to focus on marketing their products here. Undeniably, the corporate sector has been and is a major contributor to India's current account deficit.

Trends in Bank Deposits

Analysing trends in bank deposits between 2008 and 2012, this note argues that bank depositors by and large seemed to prefer to move their money to nationalised banks. Just like any investor, depositors responded to the crisis by moving their deposits from one bank group to another, from one maturity to another, or to other assets more rewarding than bank deposits.

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