Government Defends GDP Numbers Amid Opposition Criticism
The Indian Finance Ministry has responded to criticism of the country’s GDP figures, emphasizing its adherence to a consistent practice of using the income side estimates for calculating economic growth. It pointed out that various international agencies have revised their forecasts upwards after reviewing the first-quarter data for the fiscal year 2023-24. Critics, the ministry argued, should consider other indicators such as purchasing managers’ indices, bank credit growth, increased capital expenditure, and consumption patterns to assess economic growth accurately.
The ministry explained that India calculates real GDP growth using the income or production approach, which differs from measuring it from the expenditure side. This distinction has come under scrutiny from some, including the opposition Congress party, which has suggested that the real GDP numbers may be inflated and not accurately account for inflation’s impact on GDP growth.
Regarding nominal GDP growth being lower than real GDP growth, the ministry attributed this to India’s GDP deflator, primarily influenced by the Wholesale Price Index (WPI). The ministry clarified that WPI peaked in the first quarter of 2022-23 due to global events like the Ukraine conflict and supply disruptions, but it is now contracting year-on-year, which will normalize over time.
The Finance Ministry contended that the focus on nominal GDP growth being more reliable due to concerns about GDP deflator calculations is unwarranted. It argued that critics are attempting to find fault with economic indicators to cast the Indian economy in a negative light.
The ministry encouraged critics to consider multiple growth indicators, including purchasing managers’ indices, bank credit, consumption trends, and government capital expenditure, to gain a more comprehensive view of India’s economic performance. It also highlighted that international agencies have raised their growth forecasts for India after reviewing the latest data, suggesting a robust underlying economic activity.
Re-reported from the article originally published in The OneIndia
