India’s GDP Growth Data: Numbers Divorced From Reality?

UPDATE: 7:15 a.m. EST — India’s GDP grew by 7.3 percent in the third quarter of the 2015-16 financial year, according to advance estimates released by the country’s Central Statistics Office.

The CSO also revised the growth rate of the first quarter (April-June) to 7.6 percent from 7 percent, as well as for the second quarter (July-September) to 7.7 percent from 7.4 percent. According to CSO estimates, the Indian economy will grow at the rate of 7.6 percent in the April 2015 to March 2016 period, up from the 7.2 percent growth registered in the same period a year ago.

All components of the GDP, except agriculture, registered an increase during the last quarter. The agriculture sector slowed by 1 percent, while manufacturing grew the most — growing by 12.6 percent.

Trade, hotels, transport, communication and services related to broadcasting grew by 10.1 percent, followed by financial, real estate and professional services, which increased by 9.9 percent, compared to the previous quarter.

“The third-quarter data has surprised on the upside as high frequency indicators such as PMI, some segments in the services sector, and core industrial output pointed to a loss in momentum. Therefore, the data looks difficult to correlate,” Shubhada Rao, chief economist at Yes Bank in Mumbai, told Reuters.

Original story:

India's gross domestic product (GDP) data, which will be released Monday evening (local time), is expected to show that the country remains among the fastest growing economies in the world, but economists and analysts are finding it difficult to reconcile the official figures with ground realities.

A Reuters poll of economists put the median estimate for India’s GDP growth during the October-December quarter gone by at 7.3 percent, while another survey carried out by Bloomberg had a median estimate of 7.1 percent for the economy’s growth rate during the last three months of 2015. Meanwhile, India Ratings and Research — a wholly-owned subsidiary of the Fitch Group — offered an estimate of 7.6 percent growth rate, the fastest pace in the last five quarters. Similar to the Reuters poll, analysts at TDS also expected the number to be 7.1 percent.

India’s GDP had grown by 7.4 percent during the preceding July-September quarter and by 7 percent during the quarter April-May quarter.

If the official figures match any of the estimates, India’s growth would be faster than the 6.8 percent growth posted by China for the same quarter.

However, many economists have expressed doubts about the official data, saying it overestimated the pace of expansion of India’s economy, the third-largest in Asia.

“No matter how you cut it, while there are certain segments of the economy holding up such as IT or e-commerce, large parts of the economy are actually slowing down,” Ritika Mankar Mukherjee, an economist with Ambit Capital in Mumbai, told Reuters.

India changed the way it calculates GDP about a year ago, which some economists are pointing to as the cause of the discrepancy between the official data and ground realities.

“There are inconsistencies between the picture presented by new GDP series and many other tried and trusted real activity indicators,” Rupa Rege Nitsure, group chief economist at L&T Finance Holdings in Mumbai, said.

Meanwhile, India's S&P BSE Sensex was trading almost flat ahead of the announcement.