India’s gross domestic product (GDP) grew at 7.5% during the January-March period, faster than China’s 7% in the same period, mainly on account of improvement in services and manufacturing sectors.
For the full 2014-15 the growth was 7.3%, missing the the Central Statistical Organization (CSO) estimate of 7.4%. The Chinese GDP expanded 7.5 % in 2014-15. India celebrated faster growth than China in the December quarter, but on Friday the CSO sharply revised growth down to 6.6% from 7.5%, further distorting the picture.
The growth numbers are under the new GDP series, which is wholly based on profits of companies both private and public and wage increases.
Some economists and even the Reserve Bank of India fear that it may not reflect the actual growth and that the higher growth rates are driven more by statistical factors.
Investment, credit growth, job market — major indicators of a broader growth in the economy — are all still sluggish.
Pranjul Bhandari, chief India economist, HSBC, said in a note, “Is growth picking up? The common answer is: depends. Depends on who you ask, what indicators you look at and, more recently, how much you buy into the new GDP series.” “Here is a quick stab at the question. Relying on the more trusted indicators, 60% of GDP is still in the woods. Agriculture, construction, banking and public administration are not showing signs of improvement. On the other hand, the remaining 40% of GDP, comprising of manufacturing, utilities and trade/transportation, has inched up from depressed levels, though upticks are gradual at best,” Bhandari added.
The GDP growth for the entire FY15 now provisionally stands at 7.3%. The GDP growth rate for first quarter of FY15 was revised upwards to 6.7% versus an earlier estimate of 6.5%. The Q3 GDP growth was revised down to 6.6% versus 7.5% earlier. The Q2 GDP growth was revised to 8.4% versus earlier estimate of 8.2%.
Standard Chartered Bank said in a note, “Strong GDP prints in FY14 and FY15 are driven more by statistical factors after India released a new GDP series...rather than a pick-up on the ground. We revise up our FY16 GDP growth forecast to 7.7% year on year under the new series from 6.3% under the old series. Recent comments by the RBI governor Rajan indicate that the central bank will be cautious in drawing policy inferences from this data.”
Saugata Bhattacharya, economist at Axis Bank told dna, “The new series based on the profits of companies is fine and in FY16 the growth in the Indian economy may take over the Chinese economy.” “The real GDP or GDP at constant (2011-12) prices in the year 2014-15 is now estimated at Rs 106.44 lakh crore (as against Rs 106.57 lakh crore estimated earlier on 9th February, 2015), showing a growth rate of 7.3% (as against 7.4% estimated earlier) over the New Series/First Revised Estimates of GDP for the year 2013-14 of Rs 99.21 lakh crore, released on January 30, 2015,” an official statement said.
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