Editorial: Something To Cheer On The Economic Front

It may be coincidental but the latest economic numbers too boost the popular narrative about a third term for the Narendra Modi government. In the last couple of days, the GDP growth figures, GST collections, and the rise in the forex reserves coupled with the buoyant mood on the stock exchanges underline the positive sentiment about the performance of the Modi government. Usual nit-pickers and professional critics notwithstanding, it was remarkable for the economy to return a record 8.4% growth in the third quarter of 2023-24. It pleasantly surprised the share markets and the professional economists alike. Data released by the National Statistical Office last Thursday surpassed even the projection by the Reserve Bank of India which had projected the October-December GDP growth at 6.5%. The RBI projection was closer to the estimates of most economists. The third quarter improved numbers were on the back of improvement in manufacturing, mining, real estate construction, trade, communications, etc. However, the high difference between the GDP and Gross Value Added in the December quarter led some economists to question the high growth for the third quarter. GVA, broadly growth minus indirect taxes and subsidy on goods and services, is supposed to be a better indicator of growth. In the December quarter only agriculture was a laggard while all other major sectors contributed to growth. Unlike previous quarters both private consumption and investment improved in the December quarter. The auto sector reported higher sales, with the off-take of cars reaching a record high. An indicator of the economic pick-up was the rise in production of coal. Coal India Ltd. reported a 10.5% increase in production during the April-February period in the current financial year. (Small wonder that the shares of Coal India are ruling at record highs at the bourses.) As for the forex kitty, as per the latest data from the RBI, forex reserves rose by $ 2.9 billion in the week ended February 23. Total reserves at the end of the previous week stood at $ 616 billion. However, there were some worrying signs as well. The household savings rate continues to be low. Consumer price inflation being a major culprit. Also, people prefer to invest in stocks and shares. Thus denying the government more funds to invest in infrastructure projects. Another concern was the liquidity crunch in the banking system. It is unlikely to improve immediately, given that by mid-March tax payments will have to be made by all taxpayers, corporate or individuals. A remarkable positive is the handsome increase in exports with the country gaining from the slow but certain shift from China to India along with the Southeast exporting economies. All in all, it is clear that the economy has emerged from the post-Covid squeeze. Further momentum can be expected after the Lok Sabha poll interregnum.