The Central Statistical Office surprised the nation on Tuesday evening when it released advanced estimates of Gross Domestic Product growth for the October-December quarter. Despite widespread economic disruption caused by the Union government’s demonetisation move on November 8, the GDP figures have registered a robust growth of 7% in the third quarter. This defies predictions by most economists that weak consumption would drag the rate down well below that figure.
GDP when measured by expenditure method is obtained by adding private consumption expenditure, government consumption expenditure, investments and net exports (imports minus exports). The private consumption expenditure forms a bulk of the GDP measured through this method and this is what has grown by 10% in Oct dec period .
This when 86% of all valid currency notes were demonetised on November 8 and Indians were under tremendous pressure from arbitrary limits on bank and ATM withdrawals. How did people consume so much when there was an acute scarcity of cash?
I forgot they went on this spending binge by taking loans ,after all it is not necessary that people spend their hard earned money on consumption they can also take loans…… right?
Oops even growth in retail loans collapsed during oct-dec perios
So my guess is there is preponement of future purchases out of cash remaining with household. if it is true then it is clearly a case of upfronting the GDP
I read that method of computation and base year has been reset to paint rosy picture. If the robustness in domestic private consumption numbers is due to advancing the consumption,then succeeding period numbers may be lean. Please throw some light on various aspects
yes you are right if these GDP numbers are right , then we might have preponed lot of this private consumption expenditure which will be reduced from future GDP
But hasn’t it actually happened…People have spent their old notes for buying lot of expensive goods, many employees have been paid salaries in advance, lot of inventory in real estate has rolled over (in black), Gold has been purchased at astronomical prices, Collection of Municipal taxes went up across the board, people were buying rail and air tkts in advance.. Weren’t we discussing all these topics 2 months back? In fact there was a joke going around that people who didnt have enough money before Nov 8 were searching their creditors to pay off all their debts.
i agree as per tim cook apple had the best quarter in oct-dec 2016 but issue is it not captured in official channel and we can only make a guess about it. to an extent it is right then it is only preponement of purchases and hence high private consumption expenditure.