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India’s Growth Rate
The discussions surrounding the Indian economy’s performance during the past three-and-a-half year rule of the National Democratic Alliance government have been entirely concerned with the ups and downs of particular year-on-year quarterly growth rates alone, and this amounts to missing the wood for the trees. This article attempts to contrast the notion of a growth rate that is normally employed in the growth theory with y-o-y quarterly rates for the Indian economy. It argues, in particular, that the policy failure (if any) associated with demonetisation cannot be judged with reference to growth rates.
The author acknowledges Pradip Maiti, Mihir Rakshit, and C Rammanohar Reddy for helpful discussions.
There is an ongoing debate about the performance of the Indian economy during the current National Democratic Alliance (NDA) government’s tenure. The general sentiment is adequately summed up by Rao and Rangarajan (2017) in a newspaper column which says: “The sharp deceleration in the growth of the economy as revealed by the first quarter estimate of GDP released a month ago has been widely commented upon.” The “sharp deceleration” referred to is captured by Figure 1, which is based on the data published by the Ministry of Statistics and Programme Implementation (MOSPI). It shows the year-on-year (y-o-y) quarterly growth rates of the Indian economy from the first quarter (Q1) of the fiscal year (FY) 2014–15 to Q1 of 2017–18.
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