Why FM P Chidambaram chose 33-year average as growth benchmark

MUMBAI: Finance minister P Chidambaram surprised many while presenting the Interim Budget on Monday, when he said that over the 33-year period from fiscal FY81 to FY13, the average GDP growth rate was 6.3%. He also stressed on the fact that this rate was better than the 5.9% GDP growth rate recorded between FY99 and FY04, the period during which the BJP-led NDA was in power at the Centre. The question here is why 33 years? Why not 32, 34 or any other number of years?

India's long-term GDP growth rate data, analyzed by TOI, reveals that the logic behind this magic number of 33 years is that in FY80 the Indian economy had contracted by 5.2%. If the FM had included that year's GDP growth number in his calculation, it would have dragged down the average GDP growth to 5.9% for 34 years ending in FY13. This figure is equal to the average GDP growth of 5.9% recorded during the NDA rule between FY99 and FY04. So, including FY80 data would have made it difficult for the FM to justify that NDA did a worse job in terms of GDP growth during A B Vajpayee's term when compared to the long-term trend.

Chidambaram was, therefore, actually trying to ensure that the growth numbers of the Congress-led government over that period appears better than both the growth during NDA's tenure as well as the long-term average, analysts TOI spoke to suggested.

However, if one ignores the long-term growth rate of 34 years, India's GDP growth was 8.4% between FY05 and FY09 during the tenure of UPA I and 7.1% between FY10 and FY13, during the term of UPA II. During both these periods, India's GDP growth was higher than the 33-year trend growth of 6.3% and also 5.9 % seen during the NDA rule. And if one considers the average GDP growth rate during the nine full years, from FY05 to FY13, the number is an impressive 7.9%.