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The Big Picture – Revised GDP data: Why the mismatch with reality?

http://youtu.be/rWecsNj7CRc

Summary:

The Indian economy is looking better than anyone expected. It is being touted as on par with China and is even expected to overtake it sooner than one thought it would. This is what the new GDP numbers based on revised methodology are saying. What was thought in 2014 was just 4.7% growth and now it is being said that India has grown at 6.9%. However, some economists and analysts are not convinced with the new numbers. They point out that these numbers do not match the reality on the ground and meet in terms of Industrial production, Consumer demand, manufacturing growth and even agricultural growth.

Change in methodology and revision of the base year take place periodically. However, such dramatic changes were never observed earlier. Even the experts are unable to explain this unprecedented jump in the GDP numbers. Lack of strong evidences has made them say this and such concerns are valid in the absence of valid information. On the other hand there are also people who have accepted these numbers since they are arrived at based on the system of national accounts which is a well established international practice. Since we have much broader data sets now, this method is being followed. Experts also say that it is necessary to have at least 10 years of back series data which would help in better analysis and this will also help the policy makers. Since lot of businesses are unaccounted the IIP number doesn’t reflect the actual picture of industry. MSME sector, which is growing at the rate of 20%, is unaccounted in the IIP numbers.

The revised numbers are very lucrative and the Industrial sector has accepted these numbers. This would also boost investments in the industrial sector. Changing of methodology from calculating at factor cost to market cost is also a welcome step. This change is unlikely to affect the Budget which is yet to be presented. There are also pressures on RBI to bring down the interest rates.

 

 

 

 

 

 

 

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