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Source– The post is based on the article “Our growth needs deep analysis more than constant trumpeting” published in the mint on 6th February 2023.
Syllabus: GS1- Indian economy and growth
Relevance– Growth trends of Indian economy
News– A close look at trends of economy in global comparison raises some questions
Why is there confusion about India’s growth numbers?
There is controversy over the revised series at 2011-12 prices. There is a widely held view that GDP numbers in the revised series are overestimated.
The data from the informal sector accounts for a larger share of Indian GDP is available only with a time leg. Consequently, trends from the formal sector are projected into the informal sector while making provisional GDP estimates. These are subsequently revised once data from the informal sector is available.
The public debates in India revolve around headline figures of CSO. The international practice in analysing growth data is to look at output loss/gain relative to trend growth rate.
What can be analysed from comparison of average growth rate of 2014-22 of India with other Asian economies?
The fastest growing economy over the past seven years was neither China nor India. It was Bangladesh.
Global attention is focussed on China deceleration due to Xi Jinping policies. He privileges security over economic growth. However, growth deceleration over this period is more for India as compared to China.
There is talk of an economic crisis in Pakistan. However, its average growth rate during the past four years was more than India.
During this period, Bangladesh overtook India in per capita income. India’s neighbours to the east and west had better average economic growth over the last four years.
Output loss of 18.2% of GDP over the last four years in India is very high. This is a substantial loss. It is significantly higher than China and other South Asian neighbours.
What needs to be done by economic policymakers?
There is a need for assessment of large output loss.
Corrections are required in the GDP numbers based on the 2011-12 series.
There is a need to assess the output loss that can not be recovered.
Trends of downward shifts need to be studied. True extent of long term damage will be known once the data on the informal sector is finalised.
Steps needed to reverse the growth trend should be finalised.
