‘Wrong to Assess Economic Activity on GDP Alone’: Finance Ministry Defends Data, Calls Out Critics

Amid criticism by certain sections on India’s GDP data, the Ministry of Finance on Friday said it is wrong to look at the underlying economic activity based on GDP indicators alone.

India’s gross domestic product (GDP) grew at four-quarter high of 7.8 per cent y-o-y during the April-June 2023 quarter (Q1 FY24) as compared with the 6.1 per cent growth registered in the preceding quarter ended March 2023, according to the latest official data released last month.

The Finance Ministry said Indian GDP data are not seasonally adjusted, and they are also revised multiple times before they are finalised three years after the close of the relevant financial year.

It also noted that many International agencies have revised up their growth forecast for FY24 after the first quarter data for FY24 was released and they would not have done so if the underlying economic activity was weak.

“Ideally, critics would have done well to look at several other growth indicators to see if other data match their conclusions. Purchasing Managers’ Indices indicate that the manufacturing and services sectors are growing. Bank credit growth is in double digits. Consumption is improving, and the government has vigorously ramped up capital expenditure,” the ministry said in a post on X, formerly Twitter.

The ministry further said critics want to latch on to anything that does not paint the Indian economy in a good light.

It said critics would have done well to look at several other growth indicators to see if other data match their conclusions. “Purchasing Managers’ Indices indicate that the manufacturing and services sectors are growing. Bank credit growth is in double digits. Consumption is improving, and the government has vigorously ramped up capital expenditure,” it added.

The 7.8 per cent GDP growth in Q1 FY24 is faster as compared with the US economic growth of 2.1 per cent in the April-June 2023 quarter (Q1), the UK’s GDP growth of 0.4 per cent and China’s growth of 6.3 per cent. During the Q1 FY24, Japan grew 6 per cent year-on-year, while Germany contracted 0.2 per cent.

The Congress on Friday alleged that the real GDP numbers may be inflated as they do not accurately reflect the impact of inflation on GDP growth. Congress general secretary Jairam Ramesh said investment and exports have also slowed dramatically, which reinforces the lived reality of the vast majority of Indians – “that all is not well”.

He shared an opinion piece by the Narendra Modi government’s former chief economic advisor Arvind Subramanian on the current economic scenario. In a post on X, Ramesh said, “When headline management takes precedence over serious policy making, the government starts to believe its own tall stories of exuberant growth.” The reality is far more sobering as reasoned out clinically by the Modi government’s former chief economic advisor, he said.

“The real GDP numbers may after all be inflated as it does not accurately reflect the impact of inflation on GDP growth,” the Congress general secretary said. “Not only that, investment and exports have slowed dramatically, which reinforces the lived reality of the vast majority of Indians – that all is not well, and that the economic narrative the PM & his drumbeaters are tom-tomming is vastly exaggerated,” he said.