THe Blog

September 26, 2015

The Mystery of the Indian Economic Recovery

This Mint article discusses doubts about this claim of India's recovery.

 

"The first problem is that there is no official data with which to compare the current economic momentum with what happened a few years ago. It is widely known that the government statisticians have moved to a new method of calculating output—market prices rather than factor costs...

 

One big puzzle is why GDP growth decelerated when indirect taxes have grown at a robust pace in nominal terms during the first quarter while subsidies have decreased...

 

The third problem is that the macro numbers do not fit well with the facts on the ground—bank credit growth is weak, firms have reported yet another quarter of weak profit growth and investment activity is weak...

 

These three issues can be thought about as smoking guns that have created a smokescreen which obfuscates the true state of the Indian economy. It is for the government to clarify these issues if it wants the private sector to believe that the Indian economy is indeed on the recovery path."

 

Read the full article here.

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