GDP grows 7.3%; data shows revival but questions over new formula
The economy grew at 7.3% in 2014-15, up from 6.9% a year ago, government data showed on Friday.business Updated: May 29, 2015 21:05 IST
India's economy grew at 7.3% in 2014-15, the government said on Friday using a new formula that covers a raft of activities from farm-level livestock to mega infrastructure projects even as questions loomed over the new methodology.
Revised statistics showed "real" or inflation-adjusted economic growth rate for January to March 2015 was at 7.5%
Also, at Rs. 125.4 lakh crore ($2.02 trillion as on March 2015) India's GDP at current prices--the total value of goods and services produced in the country--has officially crossed that $ 2 trillion mark making it the world's 10th largest economy. India's annual per capita or average income (in current prices) stood at Rs. 87,748 from Rs 80,388 in the previous year.
India is also set to become the world's fastest growing major economy in the world, overtaking China's 7.3% growth. Despite the current slowdown, however, at $10.3 trillion China's economy is five times bigger than India, while the USA remains the world's largest economy at $17.4 trillion.
In January, the Central Statistics Office (CSO), using a new method, said that India's real or "inflation adjusted" GDP in 2013-14 grew 6.9% instead of the earlier 4.7% and by 5.1% in the year before compared to 4.5% in the earlier system.
Advance estimates for 2014-15 released in February projected India's GDP during the year to grow at 7.4%.
The new series uses 2011-12 as the new "base year" from 4.5% estimated using 2004-05 as the base year. While 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, it is the new formula that has stumped both experts and the uninitiated.
Experts say that data from other sources such as household spending, corporate earnings and tax collections and sales of goods and services were weak and do not mirror the revival trends shown in the GDP numbers.
For instance, many experts have pointed out that there were anomalies as manufacturing shows an estimated growth of 7.1% for 2014-15, which under the index of industrial production (IIP) data for factory output was 2.3%.
According to officials IIP or factory output counts the number of units produced and does not distinguish between say the value of a luxury car and an entry-level hatch-back. It is possible that factory output would have remained stagnant over a period of time, but its value would have multiplied.
Likewise, according to new the GDP numbers, the finance sector expanded by 11.5% in 2014-15 from 7.9% in the previous year, even though growth in deposits and credit appears to be tardy.
According to official statisticians this is because, in the earlier method, financial corporations in the private sector, other than banking and insurance, in the earlier series were limited to a few mutual funds (primarily UTI).
In the new series, the coverage of financial sector has been expanded by including stock brokers, stock exchanges, asset management companies, mutual funds and pension funds, as well as the regulatory bodies, SEBI, PFRDA and IRDA.