Why India's growth figures are off the mark (Using Organised sector alone is misleading entire calculations)

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 Why India's growth figures are off the mark (Using Organised sector alone is misleading entire calculations)

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• The 2008 mistake : Till October 2008, experts from IMF and finance were claiming that global economy would grow. It went into recession soon thereafter.
• India, 2019 : For 5 quarters now, GDP growth rate has gone from 8% - 7% - 6.6% - 5.8% - 5%. But experts say annual growth will be 7%. The idea is that bottoming out is happening, so good days will be back.
• Estimates : Economic Survey 2019 gave 7%, RBI 6.9%, ADB 7%, IMF 7% - this when 2018-19 was below 7%. They are all likely wrong, as they are not independent data gathering agencies, but depend on official data.
• Pertinent questions : If indeed India is growing at 5% or 6% (not a bad rate), then why is the investment rate down, and consumption stagnant? The only way to explain it is that growth is lower than 5%. 
• Facts, numbers : 

1. Investment rate is close to 30% for many years, as capacity utilisation is around 75%. So why to invest when existing capacity isn't fully productive (and profitable)? Despite RBI's rate cuts, investment rates aren't going up. June 2019 stock market peak too was useless.
2. That a "Slowdown exists" was finally admitted after much denial. Finance Minister’s multiple incentives prove it. But they don't address the core problem at all. On the contrary, moves like Bank Mergers will disrupt credit flow in short run.
3. The RBI transfer of Rs.1.76 tr will cover the revenue shortfall alone. So fiscal deficit at 3.3% will be maintained. But no stimulus at all - for that either FD rises, or revenues rise. (actual FD is at 9% by adding states and PSU expenses).

• Source of the problem : The unorganised sector has dramatically declined after demonetisation, and then hit by GST (despite being exempt or with simplied provisions). Unorganised sector produces 45% of Indian output, employing 94% of our workforce.
• Why ignored : Data for informal is collected once in 5 yrs only (reference years), due to its vast size. 
• (a) Quarterly official GDP uses Agri production data, IIP, key sector performance (railways, banking, insurance, etc.). Other than agri, all are organised sectors.
• (b) Annual GDP estimates too use organised sector data only - mining, banking, hotels, restaurants, transport, construction (steel and glass).
• So, organised sector is the proxy for unorganised. That is wrong, and hence estimates are going wrong.
• Incomplete and hence inaccurate : Since official GDP data uses only organised sector, it's incomplete. Other sources need to be used - decline in workforce, rise in MGNREGA work demand, etc. Those show that a 10% decline has happened. So present rate of growth is actually not even 5%. Let the govt. reveal what rate of growth for unorganised sector is it using.
• Summary : The data for unorganised sector is not being used properly to build GDP growth estimates, leading to wrong projections and policy actions.

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