Economists Baffled by India’s Unexpected GDP Numbers

India’s recent Gross Domestic Product (GDP) numbers have left economists puzzled as they do not align with the economic activities and indicators observed in the past quarter.

• The GDP data, released by the National Statistical Office (NSO), showed a 20.1% growth in the April-June quarter of 2023, compared to the same period last year.
• However, economists are finding it hard to reconcile this data with other economic indicators that have been lackluster during the same period.

The NSO data indicates a robust recovery from the pandemic-induced recession, but several economists argue that this does not reflect the ground reality.

• For instance, private consumption, which accounts for almost 60% of the GDP, grew by only 19.3% in the same quarter, which is not commensurate with the overall GDP growth.
• Similarly, the growth in government spending, which is a significant component of the GDP, was also not in line with the GDP numbers.

Moreover, the data shows a sharp contrast with the economic activities observed in the past few months.

• The industrial production and manufacturing sector have been struggling with supply chain disruptions and labor shortages.
• The services sector, which contributes a significant portion of the GDP, has also been underperforming due to the restrictions imposed to curb the spread of COVID-19.

Economists are questioning the methodology used by the NSO to calculate the GDP numbers.

• Some argue that the base effect, which refers to the impact of the previous year’s low base on the current year’s growth rate, might have inflated the GDP numbers.
• Others believe that the NSO might have overestimated the informal sector’s contribution, which is difficult to measure accurately.

The unexpected GDP numbers have raised concerns about the accuracy and reliability of India’s economic data.

• It is crucial for policymakers, investors, and businesses to have accurate and timely economic data to make informed decisions.
• The government must address these concerns and ensure that the GDP numbers accurately reflect the economic activities and trends in the country.