India is one of the fastest growing economies in the world and is consistently tapped by economists as the next big player in the world economy. Even with all this attention, economists themselves are struggling to determine the exact numbers of growth of the Indian economy. The Indian government has been utilizing a new GDP series to measure their economy; introduced in 2015, this new series relies heavily on nominal indicators in two areas relative to the old GDP series. Abhishek Gupta, an Indian economist with Bloomberg economics in Mumbai said that, “The new lack of appropriate price indexes to deflate these nominal indicators result in a greater separation of the new series from high frequency volume-based economic indicators.” He also noted that “this is more pronounced during periods of difference between retail and wholesale price indexes, that’s because it tends to generate a more faulty measure of the GDP deflator due to its over-reliance on the WPI index.”
The Indian economy’s fastest expansion in more than two years, specifically for the June quarter of growth was predicated correctly by only one of forty four economists surveyed by Bloomberg during a study on growth. With this new measuring metric, the numbers continue to be way off economist’s best estimates. Economists are unsure about the validity of Indian economic growth while utilizing this metric as these estimates are rarely in line with reality. Gupta has suggested a fix to the hiccups in the metric by utilizing a monthly growth tracker for the Indian economy that is much more closely aligned with the old GDP series.
A group of economists, including Gupta, are looking at differentiated data sets to get a more accurate picture of the economy. Ravindra Dholakia, a member of the Reserve Bank of India’s rate-setting panel, questioned the accuracy of any new GDP growth data. Dholakia believes that the statistical office is overestimating manufacturing output by replacing the annual survey of industries with corporate financial data. Another point of confusion is reported eight percent economic growth. Despite a weak export economy, distressed farmers, and inadequate job levels in the economy, economists are still reporting an eight percent economic growth.
Economists have praised the old GDP series in favor of the current one in use. The old series was easier to forecast for people outside of the government because it was primarily based around an index of industrial production and the first estimates of agriculture. The new GDP series, the Indian government has added quarterly results of listed companies and sales tax data, which is unfortunately not available for the public domain.
While economic growth is beneficial for the Indian public, it is not as vital for politicians running for public office. In the West, economic growth seems to be a constant focus around election time. However in India, economic growth does not seem to matter nearly as much. Past Indian electoral history shows us that economic expansion has no direct relation with electoral wins. The BJP lost their election in 2004 after promoting an eight percent economic growth under their previous BJP controlled government. Some blame the lost on the fact that the economic growth was not benefitting the Indian poor, and that it did not resonate with voters to a necessary extent. In comparison, a Congress led coalition in 2009 was able to retain their government power even after the economy slumped to a six-year low at the time of their election.
As India continues to compete on the world stage to become one of the most important global markets, it must sort out its internal conflicts regarding measuring economic growth. The validity and credibility of economic data needs to be restored, which can help economists to accurately measure the economic growth within the country. Without an efficient system of measurement, internal conflicts will cloud the fantastic growth and expansion of the Indian economy.