Worrying state of Indian economy

Manas Chakravarthy has a good summary of state of economy. The recently released headline GDP numbers based on data till November conceal more than what it reveals. This sorry state of economy is without considering the effect of demonetisation. It worsens if one accounts for the demonetisation effects.

Bulk of headline growth number is due to government consumption due to seventh pay commission etc. Government consumption accounted for 33% of the growth, while it was only 3.1% in the previous year.

If one leaves out government consumption, the growth is only 5.2%.

Growth in Gross Fixed Capital Formation (measure of private sector investment) is negative (-0.2%) in 2016-17, the first negative figure since 2012-13.

Growth in construction sector, one of the most employment intensive sectors is only 2.9%. This is a four year low.

The only respite seems to be agricultural growth at 4.1% but that's from a lower base of previous year.

To reiterate, all of this is data till November, that doesn't factor in demonetisation. Worse, the economy seems to be performing poorly as compared to even what's supposed to be the bad year of 2013.

A number of economists like Ila Patnaik have been consistently pointing to this. Their worse fears seem to have come true.

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