India on growth path

The change in the calculation of GDP numbers has produced heartening results at one level. After the revision, GDP growth for 2014 stands at a robust 6.9 per cent (from 4.7 per cent) and for 2013 it is 5.1 per cent. It means that we will overtake China sooner than predicted by the International Monetary Fund (IMF). But it would be like comparing apples to oranges. The Chinese economy, at $9.5 trillion, is five times the size of the Indian economy.

The Central Statistics Office’s new series has taken 2011-12 as the base year for computing the growth rate. But, more importantly, it has taken in a wide range of data that covers more sectors, including more labour activities and both organised and unorganised sector activity. For instance, instead of using the RBI’s yardstick of 2,500 companies, it has employed data from five lakh companies. One feels that even this is not enough to give a true picture of the country’s growth numbers considering that there are millions of small and medium-scale industries.

However, most economists are confused and sceptical about the 6.9 per cent growth figure as they feel this is not substantiated by industrial figures or the revenue or credit offtake figures. Perhaps even the way the Index of Industrial Production is calculated needs to be revised urgently. Finally these are just numbers. As RBI governor Raghuram Rajan said, “We are not yet out of the woods, therefore not too much weight should be put to these numbers.”