GDP numbers: It’s even worse than it looks: 

Narendra Modi should Resign

Photo: The Economic Times

According to Live Mint: Growth in gross value-added (GVA) at constant prices for the June 2017 quarter has been disappointing, coming in at 5.6% year-on-year, the same rate as in the March quarter. But it’s worse than it looks, because the base effect should have boosted growth in the June quarter. In the March quarter, the 5.6% growth was on top of 8.65% growth in the year-ago quarter, whereas the 5.6% growth in the June quarter was on top of 7.56% growth in the year-ago quarter. The base this time was much lower.

GDP (gross domestic product) growth for the June quarter at constant prices was 5.7%, lower than the 6.1% notched up in the March quarter. The last time we saw such slow growth was in the March 2014 quarter. Moreover, growth received a massive boost from government consumption spending, which accounted for over a third of the year-on-year growth in GDP (see Chart 1). Shorn of government consumption, GDP growth in the June quarter was a mere 4.3%.

Widely credited for launching India's economic reforms in 1991, Manmohan Singh dubbed Modi government's demonitisation move as "monumental mismanagement" and "organised loot and legalised plunder". Earlier, the former Finance Minister, Mr.P Chidambaram twetted:

RBI 'gained' Rs 16000 crore, but 'lost' Rs 21000 crore in printing new notes! The economists deserve Nobel Prize.

- P. Chidambaram (@PChidambaram_IN) August 30, 2017.

Now that we know that 99% of demonetised money has come back, the government’s estimates of how much black money would be extinguished have been proven horribly wrong. The Attorney General told the Supreme Court that he expected ₹4-5 lakh crore to be “neutralised”. Then, a Finance Ministry official told reporters that ₹3 lakh crore would not return. In the end, just ₹16,000 crore didn’t come back.

The former PM, Dr.M M Singh rightly predicted that there would be 2% shaving of the Indian economy due to mindless demonetization.

Hugo Erken, senior economist at Rabobank’s RaboResearch Global Economics & Markets, is credited for rightly predicting that first quarter gross domestic product (GDP) growth in India will decelerate to 5.7%. Netherlands-based Erken’s forecast was the most accurate in Bloomberg and Reuters surveys, where the median forecast for GDP was 6.5% and 6.6% respectively..

He says: "The GST will continue to weigh on Q2 GDP as seen from the July purchasing managers’ index, which fell sharply. Our Q2 GDP forecast is somewhere near 5.9-6%. However, in the medium-term we are still confident that India GDP growth will pick up quite rapidly to somewhere near 8% towards the October-December quarter".

So, the Pains will continue in Q2FY18 too.....

Therefore, instead of reshuffling the cabinet on Sunday, Narendra Modi should take the moral responsibility of Demonetization fiasco, and resign from the post of PM. Instead of inducting new faces, Narendra Modi should resign first and pave the way for a better PM.