India’s economic growth has been a topic of debate for economists, both inside and outside the government. Recent data suggests that India’s GDP growth rate has been strong, with a 8.4% growth rate in the year up to the fourth quarter of 2023. However, questions have been raised about the accuracy of these figures and the methods used to calculate them.
One of the key issues with India’s GDP calculation is the use of a GDP deflator that puts a heavy weight on wholesale producer prices, which can be volatile. Additionally, changes in the calculation method in 2015 have led to discrepancies between GDP figures and other economic indicators. For example, Arvind Subramanian, former chief economic adviser of India, suggested that GDP growth from 2011-2016 may have been overestimated.
Another challenge with India’s GDP calculation is the use of a single deflator and the lack of double deflation method, where input and output prices are deflated separately. This has led to situations where economic difficulties in certain sectors are not accurately reflected in GDP data.
Despite these challenges, there are signs of potential economic growth in India. Alternative indicators like electricity use and freight traffic, as well as surveys of purchasing managers, have shown positive trends. Forecasters expect a 6.5% annual growth rate over the next five years, indicating a potential acceleration in India’s economy.
Overall, while there are limitations and discrepancies in India’s GDP calculation methods, the data suggests that there may be a genuine acceleration in the country’s economic growth. The government is working towards improving its price indices and incorporating services into its calculations, which could provide more accurate and reliable data in the future. Despite the mixed picture, most government economists are hopeful about India’s economic outlook.
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