‘The full benefit of GST is still to be realised’

The revival in the economy is expected to continue due to more stability in global prices of commodities and the impact of the Goods and Services Tax (GST). The Central Statistics Office on Thursday had pointed to an upswing in the economy with an estimated 6.3 per cent GDP growth in the second quarter. In an interview to BusinessLine , TCA Anant, the country’s Chief Statistician and Secretary, Ministry of Statistics and Programme Implementation, said that the impact of demonetisation has now worn off while the benefits from GST will flow in. Excerpts:

The second quarter GDP growth has shown a rebound and core sector data for October has also been robust. Will this reversal in growth continue?

I expect the revival will continue. There is more stability in global commodity and oil prices and the growth pattern will continue.

You spoke about a possible underestimation in GDP due to uncertainty over GST collections…

With the uncertainty over GST and delay in filing returns, we feel there will be further addition to the taxes for the period between July and September. So I don’t see any reason to not only maintain the level of growth but also a slight bump in growth due to higher GST collections. By increasing the ease of doing business in manufacturing, GST will also help push up gross value addition in the sector.

Farm sector grew by 1.7 per cent in the second quarter. There have also been concerns over agrarian distress…

Crop production numbers have come in poorer due to base effect and as the monsoon was not as good as last year. The agrarian distress story has many other elements linked to it such as the manner in which agrarian markets operate and infrastructural constraints that lead to sharp change in prices. The government has been addressing these issues as part of long term decisions to further strengthen agriculture.

To what extent does the GDP data reflect the informal economy and the impact of demonetisation and note-ban on it?

Why do you say GDP doesn’t reflect the informal economy? It does. In agriculture, which is largely informal, our assessment of value added is based on estimates of Agriculture Ministry and animal husbandry. Similarly in construction, we measure the progress through consumption of steel and cement. The third part of the informal economy is in trade…we look at tax collections, which give us data on non-corporate part of trade. All of this is part of the informal economy which the GDP figures are also revealing. So the contention that we have not reported something in GDP is not being substantiated by direct evidence.

So is it correct to say that the effect of demonetisation and GST has been worked out of the economy?

The effect of demonetisation has been almost worked out. The effect of GST in part has been worked out. The anticipatory effect took place in the first quarter ahead of its rollout from July 1. But implementation effect and the benefits from GST are still underway. So the full benefit of GST is still to be realised though the cost of shifting to a new system of tax was seen in the first quarter.

The subdued investment rate is still a cause for concern?

It has been noted in the past as well. One of the largest explanations is that a very large part of the private corporate sector, along with banks, is struck with debt overhang from the past where these debts are no longer performing and have to be resolved. This is now happening through policy measures.

Is inflation a cause of concern due to the seasonal rise in prices of some vegetables and rising global crude oil prices?

Our inflation is still below four per cent and we have been under this level for over a year now.

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