The Hindu : Opinion / Editorials : STATISTICS AND REALITY

Online edition of India's National Newspaper
Friday, Jul 02, 2004

Opinion

Opinion - Editorials

STATISTICS AND REALITY

THE CENTRAL STATISTICAL Organisation has confirmed that in 2003-04 India's gross domestic product (GDP) registered its fastest growth in 15 years. Yet that the economy expanded by 8.2 per cent in the last fiscal year does not suggest that it has moved on to a higher growth path. It is now accepted that the acceleration was largely on account of the excellent monsoon of 2003: agriculture experienced a recovery and in the process pulled up the industrial and service sectors as well. Only thrice in the past three decades has the Indian economy grown by more than 8 per cent, and common to all three (1975-76, 1988-89 and 2003-04) is the fact that they were blessed by a good monsoon that followed a poor one. Hence what appears to be a remarkable performance is more accurately interpreted as a statistical phenomenon — 2003-04 witnessed an economic bounce after the dip in drought-affected 2002-03. India was among the top three performers in the world last year; the other two were China and Argentina. The Indian performance was more akin to that of Argentina (which rebounded from a 11 per cent contraction in 2002) than of China (which for more than a decade has been coming up with annual growth rates of 7 per cent and more).

It is ironic that the CSO released its revised estimates showing that the farm sector grew by more than 9 per cent in the previous financial year on the eve of Prime Minister Manmohan Singh making his first visit outside the Capital, to Andhra Pradesh, to learn about the plight of farmers. The economic statistics may show that Indian agriculture did very well after the good monsoon last year. However, there were large tracts — in Andhra Pradesh, Karnataka and Tamil Nadu — where there was no recovery because rainfall was yet again below normal. Although food production touched record levels, there is no evidence that this marks the end of the medium-term trend of a deceleration in productivity and production in almost all important crops. A second consecutive normal monsoon, as has now been predicted, will give the new United Progressive Alliance Government the chance to reverse this trend by addressing the fundamental problems of low public investment and inadequate farm credit.

A few statistical illusions also feature the balance of payments (BoP) data for the previous financial year just released by the Reserve Bank of India. It was a year when India's foreign exchange reserves rose by more than $31 billion and ended up crossing $100 billion for the first time. India's migrant workers continued to make a stellar contribution. Private transfer from abroad (mainly remittances) totalled $18.9 billion, once again exceeding earnings from software exports ($11.7 billion), and helped cover the deficit in merchandise trade ($16.7 billion). If there was one single factor that was responsible for the doubling of the current account surplus to $8.7 billion in 2003-04, it was these remittances from expatriate Indians. There was a surplus in the capital account as well, but it was a less healthy factor that made the single largest contribution to the net inflow of $22.1 billion. Even as new foreign direct investment actually declined marginally last year, there was a more than ten-fold spurt in fresh portfolio capital. The $11.3 billion of new investment in the stock market pushed up share prices, but also left the bourses at the mercy of the fickle foreign institutional investors.

Printer friendly page
Send this article to Friends by E-Mail

Opinion

News Update

Stories in this Section

STATISTICS AND REALITY

HOW ABOUT RESETTLEMENT?

When early warning is no warning

Reality of Iraq's power handover