Kadali Srinivas
The government cannot hide the truth anymore – Indian economy is shrinking. Though, the government is still projecting a rosy picture of 7.1% growth rate for the year 2016-17, only slightly lower than 7.6% of the previous year. While reports from the various sectors point towards a definite shrinking of GDP in the second half of this financial year.
The official growth projection of 7.1%, for this year, is based only on the data for the first 7 months of this financial year. Even though the data for November is available – CSO (Central Statistical Organisation) does not take this into account for its GDP projections. One wonders why the government is avoiding its own data.
If we ignore the official misinformation, all other indicators point towards a shrinking of the economy. According to a report by All India Manufacturers’ Organisation (AIMO), which has a membership of more than 3 lakh manufacturing enterprises of various sizes, industry has been severely hit by the demonetisation.
While the small and medium enterprises suffered a loss of 50% in revenue and 35% in employment, the large-scale manufacturers too experienced a loss of 20% in revenue and 5% in employment.
Exporters, both small and large, have been hit hard as well. Problems in cash flows, banks’ failure to work on proposals and problems in financing resulting from demonetisation, have contributed to the export sector experiencing 35% loss in employment and 40% loss in revenue.
The report also estimates that by the end of the financial year 2016-17, industry will experience a loss of 55% in revenue and 60% in employment. Infrastructure and construction sector which employs more than 13% of India’s urban work force, is expected to see a 40% drop in employment and revenue.
This is an alarming projection, one that makes a lie of government’s claim that there is a very small and temporary impact on the economy due to demonetisation.