Arvind Subramanian questions latest GDP numbers, calls it 'mystifying'
Former Chief Economic Adviser to the Government of India, Arvind Subramanian, has called into question India's latest gross domestic product (GDP) figures, describing them as "mystifying" and not adding up. At the India Today Conclave, he said that the actual inflation rate would be around 3-3.5%, as opposed to the government's implied inflation statistics of 1 to 1.5%. "I can't understand the latest GDP numbers; they are mystifying and don't add up," he said.
Discrepancies in inflation and consumption data
According to the GDP data for the third quarter of the Financial Year 2023-24, the Indian economy grew by 8.4% during the October-December quarter of FY 24. The data surprised economists, who had expected a reduction in GDP due to a nominal decline in government spending, poor growth in industrial output, and an uneven monsoon in the third quarter. One argument was that the GDP growth data was not supported by private consumption growth at all.
GDP growth doesn't match consumption expenditure, argue economists
Economists like Arun Kumar, Santosh Mehrotra, and Ashoka Mody argued that India's GDP growth doesn't match consumption expenditure data, suggesting that GDP growth may be overestimated. Former Chief Statistician of India Pronab Sen told The Wire that consumption growth numbers usually correlate closely with GDP growth figures, but there is a significant gap in this case. GDP growth is officially forecast to be 7.6% in 2023-24, however consumption growth is just around 3%.
GDP may be closer to 8% in ongoing fiscal: Shaktikanta
The projection of 7.6% growth for the ongoing financial year was supported by Reserve Bank of India (RBI) governor Shaktikanta Das, who said India's GDP growth might be closer to 8%. "I am quite optimistic about next year's GDP growth," he added. In the third quarter of FY24, the Indian economy grew by 8.4%, surpassing analysts' projections of 6.6% growth.
India's GDP stands at $3.6 trillion
India's GDP currently stands at $3.6 trillion, making it the world's fifth-largest economy, after the United States, China, Japan, and Germany. According to CRISIL forecasts, the Indian economy is expected to increase significantly, reaching $6.7 trillion by fiscal 2031. Meanwhile, global brokerage Jefferies forecast that India would seize the position of the third-largest economy by 2027, backed by high GDP growth, favorable geopolitics, and ongoing reforms.