The GDP estimates for the current financial year are mixed with optimism and pessimism

- Every figure of the budget for the financial year 2020-21 was left in the air

- Concessions or inducements will neither grow the economy nor alleviate widespread depression

- There is no government explanation regarding the weakening of the performance of important sectors of the country's economy

The National Statistics Office (NSO) has started issuing preliminary estimates of national income for the financial year that is about to end in 2016-17. Although this preliminary estimate is only for eight months of the current fiscal year, information is available that can be helpful in preparing the budget for the new year. The figures compiled by the Comptroller General of Accounts on income and expenditure till November also provide important clues. Due to these figures, the Finance Minister is also being helped in revising the estimates for the current financial year and preparing the budget estimates for the next financial year.

Mixed signals in estimates

Estimates can also be wrong. As far as the economy is concerned, a period of three to four months is very long. In March 2020, no one expected the spread of Corona and its rapid spread. Every figure of the budget for the financial year 2020-21 was left in the air. The financial crisis that occurred in September 2008 disrupted the growth, inflation and employment calculations of every country in the world, including India.

Some lessons and clues can be gleaned from the press release issued by NSO on January 6, 2023. Before we proceed with this, I would like to recap some of the conclusions I made in early 2023. The outlook for 2023-24 was presented based on the information obtained from official and reliable sources. My question is whether preliminary estimates issued by NSO should be looked at and revisions are required. There are some promising things in the estimates like the nominal GDP which was estimated at 11.10 percent in the budget has been put at 15.40 percent. Revenues have remained strong and this will bring more money to the government coffers. Due to this, it will be easy to achieve 6.40 percent fiscal deficit.

Consumption driven development

However, there are some disappointments in the preliminary estimates that do not warrant a change in my conclusion. Based on the Reserve Bank's bulletin, my conclusion was, “The balance of risks is tipping further towards a bleak global outlook and emerging markets appear to be weakening further.” If the money is a factor for growth in 2022-23, it is private consumption. Private consumption is found to be 57.20 percent of GDP. Private consumption will suffer as a result of higher inflation and higher unemployment rates going forward. Other growth factors are stable - the much-hyped government spending (10.30 percent of GDP) is lower than in the last two years and exports (22.70 percent of GDP) are stable on expectations of a global slowdown.

Another concern is in terms of imports, which are shown at 27.40 percent of GDP. The imports of the current financial year are much higher than the imports in the financial years 2020-21 and 2021-22 which were 19.10 percent and 23.90 percent of GDP respectively. Imports being higher than exports may mean that we are importing more for consumption. This may put pressure on the rupee, widen the current account deficit and may also lead to capital flight. Talking about the economic activity, the figures of mining (2.40 percent growth compared to last financial year) and manufacturing (1.60 percent growth) are worrying. This figure is much lower than the growth rate recorded in the financial year 2021-22. The growth rate of the construction sector for the current financial year is estimated at 9.10 per cent, but it is lower than the growth rate of 11.50 per cent achieved in the last financial year. There has been no explanation from the ministers of the respective departments or the finance minister as to why the performance of important sectors of the country's economy is seen to be weak.

Decrease in production Increase in unemployment

The outlook is not bright on the employment front either. Sectors like agriculture, mining, manufacturing, construction etc. are major employment generating sectors in the country. Growth in other sectors, excluding communications, is expected to remain modest. These figures confirm CMIE's estimate of unemployment. Instead of finding out the causes of unemployment, the government ignores these figures.

On the production front, preliminary estimates for the current financial year are disappointing. Assuming that the figures for financial year 2021-22 are as compared to the financial year 2020-21 under the impact of Corona, the estimated figures for each major sector for financial year 2022-23 indicate a possible slowdown in the economy. The growth rate of cargo movement at the country's major ports and airports will be lower than last year. The growth rate of the figures of net ton kilometers and passenger kilometers of railways will also be low. Mining (4.00 percent), manufacturing (5.00), electricity (9.40) sector will see a low single digit industrial production index. A persistently high rate of inflation is a cause for concern for the economy. Wholesale price index of food will be 9.60 percent, manufactured goods will be 7.60 percent.

How will the finance minister address these weaknesses in the budget for the next financial year i.e. 2023-24? Relief or inducements will neither grow the economy nor alleviate the widespread depression caused by inflation, unemployment and global recession. The people of February 1, 2023 expect clear policies and tough measures.