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DEBATE
Are The Changes In Computing GDP In Sync With Ground Reality?
GDP will now be estimated at market prices against the earlier factor cost and its base year will be FY12 vs FY05
COMMENTS PRINT

Gautam Chhaochharia
Head, India research, UBS

The new method of calculating GDP in terms of market prices is better and is in sync with the norm followed globally. The size of the economy remains the same in the new series because the nominal GDP hasn’t changed. The y-o-y FY14 growth is slightly high because of a low base growth in FY13. In the old series, the consensus GDP expectation for FY15 was around 6.5%. Given that the methodology used for calculating the new series is different, the projected growth for FY15 is at 7.4%. But this is comparable with the figure projected under the old series. However, without seeing the long term underlying GDP growth and having access to data, to be released by this month-end, it would be premature and inaccurate to state that the new dataset is out of sync with the ground reality.

***

Tirthankar Patnaik
Strategist, Mizuho Bank

The new data is not saying that there is a sharp jump in this year’s growth. But the problem is with last year’s data. How did 5.1% jump to 6.9%? We can explain a 100 basis points jump, not a 180 basis points jump. That is the real concern and where we have a lot of questions. Mining saw a big drop because of the ban on iron ore exports. In the new series, data mining is showing 5% growth. Where did this growth come from? Also, manufacturing is suddenly a much larger part of the economy. We are not seeing the kind of growth across sectors as reflected in the new methodology. So, there is a huge disconnect between the data and ground reality. In fact, the new methodology puts us ahead of China which is not credible given that the growth in the real economy is not as strong.


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