romans Tan Ecos Doubs over da: Ecoremists remain scapical as government projects GDP at 7.4% - The Economic Times. Doubts over data: Economists remain sceptical as government projects GDP at 7.4% ByET Bureau] 10 Fab, 20°5.06.5¢0M 1ST NEW DELHI: India is poised to become the word's fastest-growing major economy, possibly overtaking a slowing China this year itself, according to data released by the statistics office on Monday. But the numbers, based on a new series, seem to have intensified the bewilderment among experts who see itle evidence of such a sharp growth surge "The numbers are quite puzzling,” said Soumya Kanti Ghosh, chief economic advisor, State Bank of India, "They do not seem to be matching up withthe indicators on the ground." The economy is polsed to grow 7.4% in the current year, bettering 6,9% recorded last year, the statistics office said. According to International Monetary Fund estimates, China is pegged to grow at 6.8% in 2015, The new numbers will complicate matters for FM Arun Jaitley, who will need to slash the deficit by another Rs 12,000 crore from the Rs 5.31 lakh crore previously budgeted, to keep iat 4.1% of GDP, The stalistics office has recast the way in which it measures data inline with international norms, which takes market prices into account rather than the factor cost that was being Considered previously. The base year was also changed to 2011-12 from 2004-08. The earlier series had shown GOP growth at 4.7% in FY14 and the consensus forecast for the current year was 5.5%. Top Of The World Revamped Restof te TT 7 4 Rca TheWord §=6S “i Pore ecoPGrowtn Euro areal ue Crusingatong. ECO} S15 as aM Gource mi Brazil 4 Implications of Higher GDP Growth Fiscal Task Tougher | NoPressure § stronger Case oe | onkelioca | fora Target 41% of GDP | interest Rates Consolidation In absolute amount, | Econcmy contstrnits fiscal target sper already growing notneeded _ latest GOP numbers at afastpace Nos makea I5%5.19 lath crore, Thereisno __case for contin 312,000¢r less than hurry to inject ing with fiscal earlier 5.31 lakncr stimulus consolidation htpleconomictimes indatimes.cominewsleconom yfinicatrsldcubss-oer-data-econcmisis-remain-scoptical- cad tat it pty ha GP masses vate Editor's Pick + apkart targets $8 bition in sales in years Soureos M&M to buy Pipavav Defence in Rs 3,000- ceded! ‘Valuations in inca abit expensive: Markus Rosgen Sensex consolidates; op 20 intraday trading calls Buagot bts: Why brokers are picking mfg, ET SPECIAL: Delhi Pal 2015: Dont out on inopt coverageromans Doubs over da: Ecoremists remain scapical as government projects GDP at 7.4% - The Economic Times. The revised numbers show quarterly growth reached 8.2% in the second quarter and is pegged at 7.5% inthe third. Numbers based on the now series were fist released at the end of January, showing a much better performance in FY'14 over the old one. ‘The GDP data release is one of the events that Reserve Bank of India Governor Raghuram Rajan sald he would be watching before deciding on the future course of monetary policy ‘Atthe February 3 monetary policy announcement, he referred to the improved grows figure for fiscal 204 and said he found ithard to see the economy as having been “rllcking”. He went on to say that “we need to understand (the data) better. He also stuck to the old series for RBI's forecast: “The baseline projection for grawth using the old GDP base has been retained at 5.5% for 2014-15." Rajan kept interest rates unchanged on February 3, having etfected a surprse cut on January 15 and said his future policy moves would hinge on data— GDP numbers on February 9, retail inflation three days after that — and the February 28 Budget that will provide a clear picture of tte government’ finances Experts questioned the latest numbers saying they were not consistent with poor corporate results, muted car sales and other high- frequency data. Larsen & Toubro, a bellwether company, on Monday reported a lower-than-expected consolidated 9% rise in net profit amid narrower margins. "These numbers were unanticipated. The old series and the new series seem to be telling two different stories. With the new series itis. difficult to say f the economy has actually revived or no,” said Abheek Barua, consultant at the Indian Council for Research on Intemational Economic Relations (Irie), a think tank. "The numbers need careful analysis before using them for policy-making. | am at a loss as an economist to draw meaningful conclusion ftom these numbers.” The ealier series showed the economy was struggling to touch 6.5% with a 0.7% contraction in manufacturing last fiscal year while the ‘new one reflects robust overall economic growth, including in manufacturing. GDP growth for FY14 was revised to 6.9% from 4.7%. National Statistics Commission Chairman Pronab Sen strongly defended the data, explaining that GDP measures value addition, which ccan come from efficiency gains. He said final corporate tax payments will bear this out The data show a substantial improvement in investment and demand in the economy. Gross fixed capital formation, a proxy for investment, is estimated to grow by 4.1% in FY15 against 3% in the last fiscal. Similarly, private final consumption expenditure, which indicates demand in the economy, is estimated to expand by 7.1% this fiscal versus 6.2% last year. htpleconamictimes indlaimes.cominewslaconam yfindicatrsidcubs-over-data-econcmisis-remain-scoptcal-as- 20romans Doubs over da: Ecoremists remain scapical as government projects GDP at 7.4% - The Economic Times. Industry too is baffled, especially since it undermines the argument for rate cuts and government stimulus measures. Stil there were some aspects that could be addressed "The Union Budget may consider some measures to revive investment, particulary in the sectors that are experiencing slowdown,” the Confederation of Indian Industry said in a release. "Further, the data show significant moderation in inflation as measured by the GDP doflator, which should provide comfort to RBI in reducing interest rates to amuch greater extent.” Growth in the agriculture sector has been pegged at 1.1% although FY15 was a rainfall-dficit year. The 10% growth estimated for the services sector has also raised eyebrows as credit growth remained low, suggesting that real investment activity was yet to take off "The 10% services sector growth is dificult to understand,” said Ghosh of SBI, "The data has taken into account production taxes, which push up numbers even if there is no production on the ground." The manufacturing sector, the share of which has increased to more than 17% in the new series, is estimated to post 6.8% growth this fiscal, up fram 5.3% in FY The third quarter saw the lowest manufacturing growth this fiscal at 4.2%, against 6.3% and 5.6% in the fist two quarters, respectively Public administration and defence services posted a 20% growth inthe third quarter, indicating increased expenditure on defence and other key ministries. "The robust growth revealed by CSO (Central Statistics Office) suggests that rate cuts by the central bank are unlikely to exceed 50 bps (basis points) over the next few quarters,” said Aditi Nayar, senior economist, ICRA. A basis point is one-hundredth of a percentage point htpleconamictimes indlaimes.cominewslaconam yfindicatrsidcubs-over-data-econcmisis-remain-scoptcal-as-