The Hindu Business Line : GDP growth pared to 4 pc

THE Government has yet again revised downwards its estimates of growth in the country's real gross domestic product (GDP) for 2000-01. According to the `quick' estimates of national income for 2000-01, released by the Central Statistical Organisation (CSO) here on Thursday, the economy grew by a mere four per cent last year. This marks the second consecutive downward revision.

In its first `advance' estimate, released on January 30, 2001, the CSO had reckoned real GDP growth for 2000-01 at six per cent. This was subsequently reduced in its `revised estimates', released on June 29 to 5.2 per cent. The latest `quick' estimates now put the figure at 4 per cent, a full two percentage points below the original estimate.

From the accompanying Table, it can be seen that the downward revision in overall GDP growth has been partially on account of agriculture, with the CSO clearly having underestimated the impact of last year's drought, which had led to a decline in the output of rice, wheat, pulses, oilseeds and cotton by 5.4, 10, 20.4, 11.2 and 16.3 per cent, respectively.

As a result, agricultural growth for 2000-01 is now estimated at minus 0.2 per cent, against the earlier figures of 0.2 per cent and 0.9 per cent.

But more than agriculture what is striking is the magnitude of revision undertaken for the services sector. The `advance' estimates had estimated growth for 2000-01 at 8.3 per cent, which was more-or-less in line with the average eight per cent level of the previous decade.

However, it now turns out that services actually registered a growth rate of just 4.8 per cent in the last fiscal. Within services, it is the sub-sector `financing, insurance, real estate and business services' that has been subjected to the maximum downward revision in growth - from 9.6 per cent and 9.1 per cent in the `advance' and `revised' estimates, respectively to 2.9 per cent in the `quick' estimates.

The CSO has noted that the "negative growth of 2.2 per cent in banking and insurance sector during 2000-01 has been mainly on account of the decline in the output of non-banking financial institutions".

While the growth in `banking and insurance' has fallen from 13.4 per cent in 1999-2000 to minus 2.2 per cent in 2000-01, that of `real estate and business services' has risen from 7.4 per cent to 9 per cent.

Analysts say that the downward revision in the GDP growth for 2000-01 to 4 per cent - the lowest since the 1.3 per cent level of 1991-92 - would help the Government to the extent of providing a lower base for projecting a higher growth rate for the current fiscal.

Incidentally, the CSO has simultaneously lowered the GDP growth rate for 1999-2000 - from 6.4 per cent in the `quick' estimate to the latest `provisional' figure of 6.1 per cent.

In his Budget Speech for 2001-02, the Finance Minister, Mr Yashwant Sinha, had referred to the Indian economy continuing to exhibit "both growth and resilience" and the fact that "overall economic growth this year (2000-01) is expected to be about six per cent despite a series of unexpected setbacks". In the light of the cushion afforded by the lowered estimate of four per cent, one could expect Mr Sinha to echo a similar sentiment for the current fiscal in his forthcoming Budget speech as well!

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