India’s economy will likely grow at 7.4% in 2014-15, the government forecast on Monday, under a new formula that covers a raft of activities from farm-level livestock to mega infrastructure projects and trendy smart-phone sales.
Revised statistics showed “real” or inflation-adjusted economic growth rate for October-December 2014 was at 7.5% making India the fastest growing major economy in the world, overtaking China’s 7.3% growth.
According to the new method, real growth rate of India’s gross domestic product (GDP)—the measure of the total value of goods and services produced in the country—was 6.9% in 2013-14, higher than the earlier estimate on the basis of old series was 4.7% after factoring in new data on output and spending of under-represented items such as LED televisions.
The growth rate for 2012-13 has also been revised upwards to 5.1% according to the new series which uses 2011-12 as the new “base year” from 4.5% estimated using 2004-05 as the base year.
The base year of the national accounts is changed periodically to factor in structural changes in the economy and present a more realistic picture of macroeconomic aggregates.
The new series, which has been in the works for a couple of years, includes data on unorganised manufacturing and services and income from public private partnership (PPP) projects, among others.
Experts were, however, cautious in reading the new data as signs of definite turnaround. There are anomalies as manufacturing shows an estimated growth of 6.8% for 2014-15, which under the index of industrial production data for factory output will probably be between 2-3%.
“The difference may be attributed to the GDP being based on value added concept while IIP is on production – though the two should ideally converge,” CARE, a credit ratings and research firm, said in a report.
Likewise, the finance sector growth will likely expand 13.7% while growth in deposits and credit appears to be tardy.
“While these numbers reinforce the view of the earlier series of improvement, the numbers get magnified significantly. Therefore, overall perception on economy should not be changing,” CARE said.
GDP in market prices for 2014-15 has been pegged at Rs. 126 lakh crore, somewhat lower than the level assumed in the budget. "This would make the task of restricting the fiscal deficit at 4.1% of GDP slightly more stringent," said Aditi Nayar, senior economist, at credit rating and research firm ICRA.