Economists question growth claims

Dubai : The government's claim that the Indian economy grew at its fastest pace in over two years in the April-June quarter has been questioned by economists, who said the huge gap between the different growth estimates was confusing, according to a report published by the Mumbai-based Economic Times.

The value of all goods and services produced by India, or the gross domestic product (GDP), grew 8.8 per cent in the first quarter of the current fiscal, according to the ‘supply-side' growth estimate arrived from various sectors such as agriculture, industry and services. The numbers were 6 per cent a year ago and 8.6 per cent in the previous quarter.

But, the robust 8.8 per cent growth figure was not corroborated by the ‘demand side' of the equation based on transactions in the market place, it said.

The demand number showed that the economy grew as low as 3.7 per cent during the first quarter of the current year. On an average, the divergence is well below 0.5 per cent, though on a few occasions it has touched 2-3 per cent.

"I think there is a methodological mess in the GDP estimates," Mridul Sagar, chief economist at Kotak Securities, was quoted as saying. Indirect taxes are netted out and subsidies added to the demand side of the GDP figure to arrive at the supply-side estimate. Since excise duties were rolled back and subsidies cut, the demand-side GDP growth should have been higher than the supply-side number. But, it was the reverse, as per government data.

"The divergence (of 5.1 per cent) is at a record high and also inexplicable... Two-thirds of the demand-side GDP growth in the first quarter of this year is because of discrepancies." said Sujan Hajra and Gautam Singh of Anand Rathi Financial Services.