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Does India's New Series GDP Data Overestimate Manufacturing Output?

-TheWire.in

The new series GDP data has been mostly replaced with corporate financial data for estimating manufacturing value-added, resulting in manufacturing assuming a higher share in India’s GDP and growing at a faster rate compared to the older series.

New Delhi:
Does the new method by which India calculates GDP (gross domestic product) data overestimate manufacturing output? This apprehension has been flagged by a key member of the Reserve Bank of India’s monetary policy committee (MPC) in a recent article in the Economic and Political Weekly.

Last week, data released by the Central Statistics Office showed that the GDP grew by an impressive 8.2% in the first quarter, sharply up from 5.6% a year ago. This was higher than 7.4-7.6% growth rate forecast by economists.

In particular, the data showed that India’s manufacturing sector grew by a healthy and surprising 13.5%.

The EPW article says that the new series GDP data has been mostly replaced with corporate financial data for estimating manufacturing value-added. This decision has resulted in manufacturing assuming a higher share in India’s GDP and growing at a faster rate compared to the older series, the article argues.

The piece has been authored by Ravindra Dholakia, a member of the MPC, along with R. Nagaraj – who teaches at the Indira Gandhi Institute of Development Research – and Manish Pandya, who works for the Gujarat government’s directorate of economics and statistics.

Citing the robust GDP numbers, finance minister Arun Jaitley said the Indian economy is doing well at a time when the global economy is facing turmoil due to trade spat. He attributed this to the Modi government’s reforms and fiscal prudence.

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