The Finance Ministry has responded to criticism regarding the credibility of Indian GDP data, emphasizing that it is incorrect to solely rely on GDP indicators to assess underlying economic activity. The Ministry stated that critics should consider other growth indicators, such as Purchasing Managers’ Indices and bank credit growth, which indicate that the manufacturing and services sectors are growing. They also highlighted the improvement in consumption and the government’s increased capital expenditure.
The Ministry further explained that Indian GDP data is not seasonally adjusted and is finalized three years later. They argued that relying on higher frequency data would provide a more accurate view of economic activity. In fact, the Ministry suggested that India’s growth numbers may actually underestimate the reality, as the manufacturing growth indicated by the Index of Industrial Production is lower than what manufacturing companies are reporting.
The Ministry also refuted claims that nominal GDP growth is lower than real GDP growth, dismissing it as a tactic to undermine the credibility of GDP numbers. They explained that India’s GDP deflator, dominated by the Wholesale Price Index, peaked in the first quarter of 2022-23 due to oil and food price increases. They assured that this will normalize as the statistical base effect disappears, and inflation rates decrease.
Addressing the calculation of GDP growth, the Ministry clarified that the Income or Production Approach was used for the first quarter of 2023-24, resulting in a 7.8% growth rate. They stated that the statistical discrepancy, which can be both positive and negative, is added to the expenditure approach estimate to balance the figures over time.
In conclusion, the Finance Ministry affirmed that India consistently uses the Income Side approach for calculating GDP growth and does not switch between approaches based on favorability. They criticized the attempt to discredit nominal GDP growth and emphasized that critics are using any argument to paint the Indian economy in a negative light.
Sources:
- Finance Ministry statement
- Purchasing Managers’ Indices
- Index of Industrial Production