Q2 Results “Not Bad at All”; Economy Returning to Normal Rate of Growth - Pronab Sen

2 weeks ago 22

Q2 results "not bad at all"; economy is returning to its normal rate of growth: former Chief Statistician, Pronab Sen, to Karan Thapar for The Wire. .......................................... In an interview to discuss the recently released Quarter 2 results, India’s former Chief Statistician has voiced an opinion which appears markedly different to the general consensus that Quarter 2 results are disappointing. Pronab Sen says the results are “not bad at all”. He says the earlier quarters with higher rates of growth were not just unsustainable but a reflection of the bounce back from the way growth had sharply fallen during the pandemic. Now, he says, “we are course-correcting” and the economy is returning to its normal sustainable rate of growth which he says will be around 6% or “a tad higher”. Prof. Sen also expects growth in Quarter 3 to be very similar to Quarter 2. In a 35-minute interview to Karan Thapar for The Wire, Pronab Sen said the RBI forecast for the full financial year of 7.2% will have to be lowered. He added that the RBI was the only institution to forecast growth of this level. The budget had suggested growth would be around 6.5% and most economists believe the same. By making an out-of-line higher forecast the RBI has, in a sense, made the correction of its forecast inevitable. I will stop there. However, in the interview, Prof. Sen discusses, one by one, the performance of all the important sectors of the economy. These include agriculture, manufacturing, mining and quarrying, construction, services, exports and imports, private consumption, investment and jobs. I will leave you to see the interview to hear what he says about each of these. One hint: Prof. Sen says there are some signs – of which he will be more confident after Quarter 3 or Quarter 4 – that the MSME sector and private consumption is reviving, particularly for those lower down the social order whose consumption had earlier sharply declined. This, he says, would be good news if its borne out. In fact, this sense of possible good news echoes through the interview at two or three different places. Again, I will leave you to watch the interview and hear Prof. Sen himself. To help you, I give below the questions as a guide through the interview. Here they are: 1) I want to focus this interview on the recently released Quarter 2 results. GDP growth was just 5.4%, which is not just below the RBI’s forecast of 7% but it’s the lowest growth for seven quarters. How much bad news is that? - Q1 of 2024-2025 is 6.7%. - Q2 in 2023-2024 was 8.1% 2) Now the RBI has projected an overall growth of 7.2% this year. After Q2 came in at 5.4% is that still achievable? Or do we need to lower the forecast? 3) 5.4% is also the third consecutive quarter that growth has steadily declined. It’s gone from 8.6% to 7.8% to 6.7% to 5.4%. Could it fall further in the next quarter? 4) The Chief Economic Advisor accepts this is disappointing but insists it’s not alarming. Alarming may be a strong and dramatic term but is it serious and worrying? 5) Let’s look at the details and start with the one sector that has done well: agriculture. It was 1.7% in Q2 last year but it’s more than doubled to 3.5% this time. How reassuring is that? 6) Now for the other sectors. Manufacturing growth has collapsed to 2.2% compared to 14.3% a year ago whilst mining and quarrying has slipped into the red, contracting 0.1% compared to 11.1% growth last year. Is this serious or is it a one off result that’s easily reversible? 7) On the trade front, exports have only grown by 2.8% whilst imports have contracted by 2.9%. At a time when we want to boost exports I take it this is not cheerful news? 8) What do you make of the performance of construction? It’s grown by a very respectable 7.7% but that’s a lot lower than what it achieved last year which was 13.6%. So should we be pleased or concerned? 9) Now services, which is over 50% of the Indian economy, at 7.1% are at almost the same level as the 7.2% of Quarter 1. In fact, they’ve been at much the same level of growth for the last two quarters of the previous year i.e. 7% or 7.1%. Does this mean services growth has been stagnating at this level? - Q1 FY24: 8.5% - Q2 FY24: 11.6% - Q3 FY 24 9.7% - Q4 FY24 6.46% - Q1 FY25 7.5% - Q2 FY25 5.4% Join The Wire's Youtube Membership and get exclusive content, member-only emojis, live interaction with The Wire's founders, editors and reporters and much more. Memberships to The Wire Crew start at Rs 89/month. https://www.youtube.com/channel/UChWtJey46brNr7qHQpN6KLQ/join

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