India’s GDP figures were declared on May 31. The one point that was highlighted by the government as well as the media was that economic growth (read growth in gross domestic product) had recovered to 7.7%.

Of course, that was true. But it wasn’t the complete truth. India’s economy grew by 7.7% between January and March 2018. If we look at the entire 2017-18 financial year (FY, which ended in March), the economy grew by 6.7%. This is where things get interesting, and several points that should have been made were never really made. Below is a list five such points.

1. The 2017-18 economic growth of 6.7% was the slowest since the government of Prime Minister Narendra Modi took over in May 2014. In the 2013-14 financial year, the economy had grown by 6.4%. If we look at a longer period, then the economic growth of 7.7% during January to March 2018 suddenly doesn’t sound so great. But then who wants facts these days? We are all looking for a confirmation of what we already believe.

2. Indian GDP is measured in two ways; one is the expenditure/demand method and the second is the gross value added through economic activity method.

Let’s first look at the expenditure/demand method, in which GDP is calculated by summing up private consumption expenditure,  government expenditure, the investment occurring in the economy, and the net exports (that is, imports minus exports).

Private consumption expenditure during FY 2017-18 grew by 6.6%, the slowest since 2012-13. Private consumption growth is a good indicator of the confidence people have in the overall economy, so a slowdown in growth indicates that confidence has come down. More on that below.

What does this tell us? It tells us that ill-effects of demonetization, when the Modi government sucked out nearly 87% of India’s currency overnight, spilled over to FY 2017-18 as well. It also tells us that the overall economy had to bear the cost of the messy implementation of the goods and services tax (GST), initiated in July 2017. In economics there is no free lunch. Someone has to bear the cost.

3. The investment-to-GDP ratio has been going up for the past two years. But at 31.42% in FY 2017-18, it is still a lot lower than the 34.31% seen in 2011-12. It is ultimately investments that create jobs. And India needs jobs for the 10 million youth who are entering the workforce every year. Without a rapid increase in investment as a proportion of the overall economy, enough jobs will never be created.

Now let’s take a look at the second method of calculating GDP, the gross value added through the economic activity method.

This method in essence calculates the value added by different sectors in order to arrive at a total gross value-added figure. To this, indirect taxes are added and government subsidies subtracted, to arrive at the GDP figure.

Now let’s take a look at the agriculture sector. The sector grew by 3.4% in FY 2017-18. This was much lower than the growth of 6.3% in 2016-17. Nevertheless, it was better than the 0.6% growth that the sector achieved in 2015-16.

The agricultural slowdown in a pre-election year is not good news for the Modi government. Elections are due in May 2019. This is clearly visible in the farmer protests in various parts of the country in the recent past. The farmers will need some pacifying. One way the government will try doing that is by increasing the minimum support prices (MSP) of crops, which will eventually feed into inflation. The MSP is a government-mandated price point for buying agricultural produce.

5. Let’s take a look at the industrial sector. It grew by 5.5% in FY 2017-18. This was the slowest since 2013-14 when it grew at 3.8%. Interestingly, in 2015-16, the sector had grown at 9.8%. and things have gone downhill since then.

The fact that neither agriculture nor industry has grown as fast as they were growing in the past is reflected in the slowdown of the growth of private consumption expenditure, as we showed above. If income growth is slowing down, consumption growth is bound to slow down as well. That’s pretty obvious.

All in all, financial year 2017-18 was a pretty average year for India on the economic front. That is the only conclusion one can draw when one looks at the GDP data in some detail.

Having said that, there was a revival in economic growth in the first three months of 2018. Whether that continues in the days to come remains to be seen. To confirm a trend, we will have to wait for more data to come in. Keep watching this space.