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India'seconomyseenrisingthroughfogofdata
Mon,Feb92015

ByRajeshKumarSingh
NEWDELHI(Reuters)TakenatfacevalueIndiawillpostrobustquarterly
growthfiguresonMonday,butchangesinthewayAsia'sthirdlargest
economyismeasuredhasleftanalystsandthegovernment'sownchief
economicadvisordoubtinghowfarthedatacanbetrusted.
Justoveraweekago,everyonewasworkingundertheassumptionthat
IndiawasstillstrugglingtogathermomentumunderPrimeMinister
NarendraModi'sreformmindedgovernment.
PriortoModi'selectioninMay,theeconomyhadendureditsweakest
phaseofgrowthsincethemid1980s.
ThenIndia'sstatisticiansreworkedthenumbers,changingboththewayit
calculatesgrossdomesticproductandthebaseyear.Suddenlythe
economyappearedtobemotoringagain.
Growthfor2013/14wasputat6.9percent,wayabovethe4.7percentpreviouslyreported.Unfortunately,theoverallsizeof
theeconomyshrankslightly,somewhatspoilingthestory.
SurjitBhalla,chairmanofOxusInvestmentsandaformerWorldBankeconomistwhohasservedonseveralgovernment
committees,distrustedthereliabilityoftheCentralStatisticalOffice'snewdataseries.
"WhyquestionthesurgeinGDPgrowthin2013/14?BecausetheCSOrevisionsdonotpassabasicsmelltest,"Bhalla
wroteintheIndianExpressonSaturday,particularlyquestioningdataforinvestmentandgovernmentconsumption
spending.
OnMonday,IndiawillreportGDPdataforthequarterendinginDecember,andrecalculategrowth,usingthenewmethod,
forthefirsthalfoffiscal2014/15,havingoriginallyreporteditat5.5percent.Itwillnolongerprovidedatabasedontheold
formula.
Thechangeshavelefteconomistsgropingforatrend.
"Therevisionshaveyettobeappliedtoquarterlydatafromthisfiscalyear,meaningthatthelatestGDPnumbersare
redundantfornow,"saidShilanShah,IndiaEconomistatCapitalEconomics.
TheCSOwillalsogiveitsexpectationsofgrowthforthefullyear.
Usingtheoldmethodology,theReserveBankofIndia(RBI)hasprojectedgrowthofaround5.5percentforthefiscalyear
endinginMarch.AnalystsatNomuranowexpectthattobebumpeduptoaround6percentunderthenewmethod.
Otherindicators,however,suchasindustrialproductionandtrade,suggesttheeconomyisstillsufferingfromslack.
IndianowmeasuresGDPbymarketpricesinsteadoffactorcosts,totakeintoaccountgrossvalueadditioningoodsand
servicesaswellasindirecttaxes.Thebaseyearhasbeenshiftedto2011/12from2004/05earlier.
Thestatisticsdepartmentsaysthenewwayismoreinlinewithglobalpracticesandgivesabetterpictureofeconomic
activity.
"MYSTIFYING"
ThestatisticalfogwillbeaproblemforFinanceMinisterArunJaitleyashedraftsanannualbudgetthatcouldbecrucialto
liftingtheeconomyoutofalengthyrut.
Presentingthe2015/16budgetonFeb.28,Jaitleyiswidelyexpectedtoboostcapitalspendingandoffertaxbreakstoan
underperformingmanufacturingsector.
TherevisedGDPdatamaymakeitharderforJaitleytoassessthesizeofthefiscalstimulusrequiredtohelprestorethe
economytotheevenhighergrowthratesneededtogeneratejobsformillionsofyoungIndiansenteringthelabourforce.
Thegovernment'schiefeconomicadviser,ArvindSubramanian,haswarnedagainstframingpoliciesbasedontherecent
revisions,whichhebranded"mystifying".
"IampuzzledbythenewGDPgrowthnumbers,"hetoldtheBusinessStandardnewspaperlastweek.
Whilefallingglobaloilprices,coolinginflationandinterestratecutsareexpectedtoboostdemandandimprovethe
economicoutlook,listlesscorporatespendingandmountingbadloansatIndianbanksremainadrag.
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Thecentralbank'smonetarypolicyswitchedtoaneweasingcycleinJanuarywithitsfirstinterestratecutin20months,
whiletherupeecurrencyhasbeenoneofthebestperformersamongAsianemergingmarkets,helpedbyaloweroilimport
bill.
"Wemaybereachingtheoutskirtsofthewoodsbutwearenotoutofthewoodsyet,"RBIGovernorRaghuramRajansaid
lastweek."SoIdon'tthinkanydatathatsuggestsweareoutofthewoodsatthispoint,wewouldputtoomuchweightonit."
(EditingbyJohnChalmersandSimonCameronMoore)
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