Indian economy will grow by 7.4 per cent this fiscal, outpacing China to become the world’s fastest growing economy, after a revision in the method of calculations.
Aided by a 7.5 per cent expansion during October-December, Asia’s third-largest economy will this fiscal see the fastest pace of growth since 2010-11 when it achieved 8.7 per cent, even as some doubts lingered on the revised methodology.
The growth in gross domestic product (GDP) in 2010-11 was calculated based on factor cost which has now been changed to constant prices to take into account gross value addition in goods and services as well as indirect taxes. Besides, the base year has been shifted to 2011-12 from 2004-05 earlier.
Last month, the Statistics Ministry had pegged the previous year’s growth at 6.9 per cent as against 4.7 per cent estimated previously, a revision which led to some economists including RBI Governor Raghuram Rajan seeking more clarity.
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“We do need to spend more time to understanding the GDP numbers,” he had said on February 3 after releasing the bi-monthly monetary policy of the central bank that retained the forecast of 5.5 per cent GDP (calculation based on old method) growth in 2014-15.
“We will be watching the February 9 release with great care and dwell deeply into what we see there. At this point this is premature to take a strong view based on these GDP numbers,” he had said.
Industry chamber Assocham said the revision was confusing as “investment is yet to revive, consumer demand is not returning with a significant pace despite a sharp reduction in crude oil prices.”
The advance estimates released by the government further said the per capita net national income in 2014-15 is estimated to be Rs 88,538 showing, up 10.1 per cent as compared to Rs 80,388 in 2013-14.
The sectors contributing to the advance estimates, include higher manufacturing growth at 6.8 per cent and most of the services, including financial, real estate, hotels and transport growing over seven per cent in the fiscal.
However, agriculture is pegged at 1.1 per cent, much lower than 3.7 per cent achieved in the last fiscal.
When asked about comparison between Indian with Chinese economies, Director General in Central Statistics Office Ashish Kumar said it is not a “beauty competition” as their (China’s) economy is four-five times larger than that of India.
Even at this growth rate of over 7 per cent, it will take 20-30 years to match the size of Chinese economy, he added.
The base year for computing national accounts is revised by the Statistics Ministry periodically to present a more realistic picture of the economy.
The data said Gross Value Added (GVA) at basic constant prices is anticipated to increase from Rs 91.70 lakh crore in 2013-14 to Rs 98.58 lakh crore in 2014-15.
Another key indicator, Gross Fixed Capital Formation (GFCF) at constant (2011-12) prices, the GFCF is estimated at Rs 31.76 lakh crore in 2014-15 as against Rs 30.50 lakh crore in 2013-14.
At current prices it is estimated at Rs 36.13 lakh crore in 2014-15 as against Rs 33.68 lakh crore in 2013-14.
“The GFCF is expected to register growth rate of 7.3 per cent at current prices and 4.1 percent at constant prices. The rate of expenditure on valuables at current prices is same as 1.3 per cent in 2014-15 and 2013-14,” the data said.
The estimated growth in manufacturing, mining & quarrying, electricity, gas & water supply, and construction is estimated to be 6.8 per cent, 2.3 per cent, 9.6 per cent and 4.5 per cent, respectively during 2014-15 as compared to growth of 5.3 per cent, 5.4 per cent, 4.8 per cent and 2.5 per cent, respectively, in 2013-14.
In the October-December quarter the economy grew by 7.5 per cent compared to 6.6 per cent in the year-ago period mainly due to expansion in services sector.
In the third quarter, growth in agricultural sector contracted by 0.4 per cent as against a growth of 3.8 per cent in the corresponding period last year.