The Central Statistics Office is once again hammered for turning in good statistics. The December quarter GDP growth, at 7 per cent, was lower than the September quarter’s 7.4 per cent, but that’s not why economists are upset. Factoring in demonetisation, they predicted a bigger decline by 1–3.3 per cent and as it wasn’t as bad as estimated, it is believed that the CSO was painting an optimistic picture. The latest figures are a prime example of the divergence between estimates and the ground reality. Economists confidently predicted a carnage and were right to an extent.
Growth in cash-dependent real estate and financial services sharply decelerated to 3.1 per cent. Construction activity fell to 2.7 per cent. This was partially offset by a good monsoon with agricultural output rebounding strongly at 6 per cent. Manufacturing activity did well, growing at 8.3 per cent. Better performance by private sector that accounts for three-fourths of manufacturing activity, likely helped. Automobile production fell, but not retail sales or even consumer durables that nudged private consumption growth to 10 per cent. Sucking out 86 per cent of the cash in circulation was projected as an economic nightmare.
But evidence shows people quickly got on with their lives. The consumers spent during spring because it was the festive season. They spent in winter too, or that’s what the data wants us to believe. Or perhaps the companies window- dressed sales to route unaccounted cash. Either way, consumption soared. Government expenditure, investment, commodity prices and external sector all did better than expected. But these are only advance estimates; economists expect FY17 numbers to be revised lower when concrete data becomes available in May. They also predict FY18 growth to be subdued due to GST implementation in July and global uncertainties. But to quote Sherlock Holmes, it is a capital mistake to theorise before one has data, for one begins to twist facts to suit theories.