Economists devise way to solve India's growth puzzle

Hyderabad: In 2015, India switched to a new method for calculating economic growth which transformed the country’s economy to the fastest growing in the world.

Apart from a moderation in the Chinese economic growth, some economists believe that the new series is also responsible for catapulting the economy to the top.

“India’s new GDP series, introduced in 2015 with back-data available since 2012, relies more heavily on nominal indicators in two key areas relative to the old series,” Abhishek Gupta, India economist with Bloomberg Economics in Mumbai, told Bloomberg.

Many economists find the new series puzzling as it is based on nominal indicators. Economists have also found it difficult to predict the growth accurately.

In order to solve the puzzle, a Bloomberg report said Mr Gupta has devised “a new monthly growth tracker for India that compares more closely with the old GDP series. Indicators such as rainfall, auto sales and foreign tourist arrivals, co-relate more with the old series.”

According to the report, the tracker signals the Indian economy’s growth momentum is fading.

“The eight per cent plus growth is puzzling at a time when export growth is weak, farmers say they are in distress and there isn’t data to show enough jobs were created,” the report claimed.

In September, a member of the RBI’s monetary policy committee, Ravindra Dholakia, questioned the accuracy of new GDP growth data.

Writing in a paper published in Economic and Political Weekly (EPW), Mr Dholakia argued that the statistics office is overestimating manufacturing output by replacing the Annual Survey of Industries with corporate financial data in the new series.

A revision of growth numbers in the previous years using the new data series found that economic growth topped 10 per cent under the previous UPA government in 2007.