Real growth vs. fake arguments: And never the twain shall meet

Suspicion over India's Q1 GDP data reflects a misunderstanding of how the calculations are made

- V. ANANTHA NAGESWARAN & RAJIV MISHRA

After India announced its fiscal first quarter GDP growth of 7.8%, several forecasters, including credit rating agencies, raised their forecasts for economic growth in calendar year 2023 or 2023-24. However, some commentators remain adamant that they would not let evidence interfere with prior positions. One example is ‘India’s fake growth story,’ an article published by Project Syndicate (bit.ly/44HspPN) on 6 September.

The core of that piece seems to be about this line entry called ‘statistical discrepancy.’ We will tackle that first. The design of data systems in India enables easier estimation of national income from the income side than expenditure. It is easier to estimate an entity’s income or gross value added (GVA) by taking the difference between its output and inputs than to look at output-wise expenditure in the entire economy, separating expenses on final and intermediate goods and services. The expenditure-side approach is often facilitated when more-robust income-side estimates have been obtained. It is also useful for analysing different components of demand.