00:00Joining me first on the show is Mr. Sanjeev Sanyal, member of the Economic Advisory Council
00:04of the Prime Minister. Mr. Sanyal, I appreciate your time. Real GDP grew 7.8% this quarter,
00:12well above the RBI's own estimate. Manufacturing at 9.2%, services at 10%,
00:18every engine fired together. Is this genuinely broad-based growth or one exceptional quarter?
00:30Well, you are indeed right that 7.8% was a lot stronger than many of us expected. This is
00:38not
00:38just RBI, it's stronger than I expected as well. Yes, also that it is being driven by a whole bunch
00:45of different sectors. So it's not just one sector doing especially well. Manufacturing did well,
00:51but so did many services segments like financial services, and even you also had construction
00:57doing very well. So there are a lot of things driving it. It's also driven to a significant
01:03extent by investment. So of course, obviously, government investment, public investment is
01:09doing well, but the private sector is also investing reasonably. So it is very broad-based growth. So
01:25do remember that the environment where we are in is very, very disrupted. We do have a war right next
01:33door in Iran, and that impacts many things. You know, it's not just our energy supplies where
01:39everybody talks about it. Do remember the Middle East is a big export market. There are 10 million
01:45odd Indians living there, and they send remittances, and they do various things which have an impact on
01:50economy. And then, of course, there are the whole disruptions with the Trump tariffs, and not just
01:57the ones that deal with us. Do remember that disrupting the world economy generally is bad for
02:02us, because it means our, you know, the rest of the world is not conducive for exporting. So in this
02:07environment, doing the 7.8 is good, no doubt. Sustaining it, however, will require us to continuously
02:15adjust and work very hard. I mean, we have the additional problem of an El Nino, which is
02:20impacting us as well. So this is not an easy place in which to sustain these kind of growth rates.
02:26I
02:27would be quite happy with anything in the range of 7%. You know, since you spoke about El Nino,
02:33the Brent crude has spiked after the US-Iran exchange of fire, and a strengthening El Nino threatens
02:39the monsoon. If those risks materialize, how much of this 7.8% actually survives?
02:48Well, 7.8% is for that quarter. So that is for that quarter. The question is, what will it
02:55be in the
02:56subsequent quarter? So it's not about surviving. But the question is, will the momentum be at the same
03:01level going forward? Now, I think I would be very surprised if there's no impact of the El Nino on
03:08agriculture. So I think there will be some impact of that, maybe not as bad as many people have
03:13feared, or what has happened, for example, in Europe, where, you know, there's a massive drought.
03:19So I think we dodged the extreme drought bullet, but I think there will still be some impact on
03:25agriculture. The monsoons are still playing out, so I can't really put a number on it. But
03:29it is something we need to look at. And yes, you just mentioned oil prices have spiked again.
03:35We have managed to keep going by keeping a very diversified source of energy coming to us from,
03:44whether it's from Venezuela, even the US, of course, Russia. And it's not been easy. You know,
03:50there's always threat of sanctions and all kinds of other threats. And of course, the threat of tariffs
03:57as well. So in this environment, you know, at some point, we will have some things that we will
04:04have to take on our chin. But I think given the circumstances, we are doing very, very well.
04:10Okay, since this has led to a massive political slugfest as well, Congress President Malik Arjun
04:17Kharge has called this the three U's. Unemployment, unbearable price rise, unbridled inequality.
04:24And I said that retail inflation is at a 19-month high, even as GDP posts its best print in
04:32years.
04:32How do you explain this growth and kitchen table pain rising together, both rising at the same time?
04:42Well, I mean, irrespective of what those numbers came in at, we would have heard exactly these comments.
04:48So I would just put this aside because, you know, frankly, I wouldn't like to respond to non-serious
04:55political insinuations. What I will say is, let's look at the hard numbers. The government's PLFS numbers,
05:03by the way, it is the best unemployment indicator there is. There is no other, you know, serious
05:09survey in the country. And it clearly suggests that unemployment rates, both urban and rural,
05:16have slowly been drifting downwards. So there is no doubt of that. There is an issue with
05:22the segment of educated unemployed, which I can discuss that separately. But I think overall
05:30unemployment has, if anything, come down. Prices, by the way, yes, you know, look at the amount of
05:37pressure on energy prices. I think given that the feed through to the domestic economy has been
05:43quite moderate. And even when they are talking about inflation going up, do remember that this is,
05:52you know, inflation in the four to five percent range. You know, till a decade ago, our inflation
06:00used to be in the eight to 12 percent range on a routine basis.
06:04So the fact that people are debating inflation in the four, five percent range itself, it tells you,
06:10you know, how much progress we have made. I don't know. It would be great if we didn't have this
06:15external pressure. But I think given the circumstances, oil prices and generally prices of
06:22food have remained reasonably well contained. These numbers, Mr. Sanyal, have been fueled by
06:29the manufacturing sector. So my next question will be on that. Manufacturing operating profits jumped
06:35from 9.4 percent to 21.3 percent in a single quarter. That's a massive surge. But private
06:41consumption grew only 7.1 percent. So who's actually benefiting from this growth? Companies and their
06:47margins or the ordinary household?
06:51Well, I mean, the fact of the matter is that, you know, it's good for everybody if the manufacturing
06:56sector is becoming more profitable. Do remember that the manufacturing sector is also an employer.
07:04It is also these profits are what belongs to a large numbers of shareholders. So I think this socialist
07:14idea that there is, you know, it's something between the households and the large corporations,
07:22I am sorry, that is not how the world works. Even if you wanted to talk about the households,
07:29do look at the amount of purchases they are making. I mean, car sales are at record highs.
07:37You know, sales of all kinds of things, air conditioners and all kinds of other items are doing
07:42well. So I think this idea that households are somehow in stress is not true.
07:48Okay, since again we are seeing this kind of statistical gymnastics charge, this is coming
07:54from Jairam Ramej, who has called this data statistical gymnastics. And there isn't this
08:00allegation of change in methodology to flatter the number. Is that a serious charge you want
08:07to answer? You need to answer?
08:11I don't think any serious economist is looking at this data and saying that it's not credible.
08:18We did have a problem with methodology till last year because the base year had not been updated,
08:24but incidentally a matter that I had been raising as well. And the reason we were unable to update the
08:30base year was a very simple reason. You see, every decade we update the base year at the beginning
08:36of the decade. We could not have done it in this decade for the simplest reason. Those were COVID
08:40years. And so the beginning of the decade years were not typical years. So we had to wait till 2024
08:47before we got a typical year that we could use as a base year. Now, once we got that, we
08:53of course
08:53updated the base year. And at the time that it happened, I did warn everybody that, look,
08:59don't complain now that we have updated the base year, which is what you were complaining about,
09:04that the GDP growth rate will look good because when you update a base year, what happens? You get
09:09rid of the old dying sectors from the basket and you add in relatively younger, higher growth sectors.
09:18And this is precisely what has happened. So I don't think anybody should complain. We did exactly what
09:25the IMF and others were asking us to do. And I think no serious economist is going to complain
09:31about this. The GDP is very visibly strong and it's showing through, incidentally, in other areas as
09:37well. Look at car sales numbers. Those are not from government. Corporate profitability is doing
09:43decently well. Those are not government numbers. So I think, you know, under the circumstances, but even
09:48in any circumstance, 7.8% GDP growth rate is a very strong one. As I said, I will be
09:55personally
09:56expecting it to temper going into the next few quarters. But even then, I think you will get a
10:02very decent GDP growth rate print for the year as a whole.
10:06Okay, Mr. Sanyan, my last question to you, and this is with regards to what the concerns are.
10:13Record low FDI, stagnant manufacturing employment and a mismatch between corporate revenue growth and
10:21the GDP growth as evidence that the headline figure doesn't really match the lived economic
10:26reality. So if the macro data and the micro data are telling different stories, which one should the
10:33country actually trust?
10:37They are not telling you different stories at all. I just heard, we just, you yourself just pointed out
10:42on one hand that, you know, manufacturing companies are seeing record profits and then you're complaining
10:48that the manufacturing sectors are not doing well and they're not employing people. There is no evidence
10:53of this. They're just, you know, not presenting data at all as a evidence. And in fact, they will on
11:04one
11:04side say that, you know, companies are doing well and then in the very next breath say they are not
11:09doing badly. You need to decide which side of this micro or macro data you are. They are clearly in
11:16line
11:16with each other. As I said, the manufacturing numbers are doing well. They are showing up in GDP
11:21numbers. They are also showing up in corporate profitability. They are also showing up in all
11:26the association numbers on sales of various products. I don't know how they are not in sync.
11:35All right, Mr. Sanjeev Sanyal, appreciate your time. Thank you for joining us and sharing your views
11:41on the GDP numbers.
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