Welcome 6.3 percent Growth Rate, But Early to Say Economic Recovery : Manmohan Singh

File Picture Courtesy : Hindustan Times

Former Prime Minister Dr Manmohan Singh has said it was too early to conclude that the economic slowdown has reversed as the 6.3 percent growth rate in the July-September quarter did not take into account the small and medium sector which suffered huge losses in the aftermath of demonetisation and hasty implementation of GST.

He welcomed the 6.3 percent growth rate in the July-September quarter but cautioned that it was too early to conclude that the economy has recovered.

“(It) is too early to conclude that this represents a reversal of the declining trend observed in the previous five quarters. Some economists believe that the CSO which released the figures has not adequately captured the impact of demonetisation and GST on the informal sector that accounts for about 30 percent of the economy,” Singh said addressing professionals and businessmen in Surat in the election-bound state, reported IANS.

He quoted renowned economist Govinda Rao identifying a “problem” with the calculation of manufacturing growth based on corporate results.

“This doesn’t take into account the small and medium sector which suffered the most after demonetisation and the launch of GST. A couple of big worries remain. Farm sector growth fell to 1.7 percent from 2.3 percent in the previous quarter and 4.1 percent in the same quarter last year,” Singh said, citing Rao.

He said that after farming, job losses have been the most in the construction sector.

Singh criticised the BJP government’s economic policies, particularly the “coercive steps” of note ban and the Goods and Services Tax (GST) that cost the nation hugely and “broke the back of businesses”.

“We saw the impact of demonetisation on the economy when the GDP growth dropped to 5.7 percent in the first quarter of 2017-18 under the new calculations. Even this is bound to be a gross underestimate as the pain of the informal sector is not adequately captured in the GDP calculation.

“Every one percent loss of our GDP growth rate annually costs our nation Rs 1.5 lakh crore. Think of the human impact from the lost growth – the lost jobs, the youth whose opportunities have vanished, the businesses who had to shut down and the entrepreneurs whose drive to succeed has turned into discouraged disappointment.”

Singh said that the decline in farming and construction sectors was despite the fact that the government had front loaded its spending on projects, “forcing up our fiscal deficit to a high of 96.1 percent of the Rs 546,432 crore target set for the full year”.