NEW DELHI: Refuting concerns raised by many commentators over the country’s official first-quarter GDP numbers, the finance ministry has said critics have been inventing arguments (to underestimate India’s economic growth) where none exists.
The ministry has also defended the methodology used by the Ministry of Statistics and Programme Implementation (Mospi) to measure GDP growth. In a recent article by Princeton Economist Ashoka Mody questioned the Q1 GDP growth numbers citing discrepancies arrived at through the income and expenditure approach. In another article, former chief economic advisor of India Arvind Subramanian raised the issue of the unreliability of the GDP deflator.
In an elaborate clarification, the ministry on Friday rebutted the criticism point-by-point. On the issue of the discrepancy between income and expenditure approach, the ministry stated that real GDP growth for Q1FY24 stood at 7.8% year-on-year, based on the income or production approach. However, if the expenditure approach had been used, the growth rate would have been lower. To reconcile the differences between the two approaches, a statistical discrepancy is added to the expenditure approach estimate. These discrepancies, which can be positive or negative, tend to balance out over time.
The ministry said India employs the income approach for calculating GDP growth and doesn’t switch between the two approaches based on convenience or favourable outcomes. Regarding concerns about nominal GDP being lower than real GDP growth, the ministry dismissed these claims. It said India’s GDP deflator, influenced by the wholesale price index (WPI), was affected by factors such as oil and food price increases due to the war in Ukraine and supply-side disruptions.
Ministry defends use of methodology to calculate GDP
The ministry defended the methodology used by Ministry of Statistics and Programme Implementation (Mospi) to measure GDP growth. In an article by Economist Ashoka Mody questioned Q1 GDP growth numbers citing discrepancies arrived at through income and expenditure approach