India's economic growth is set to improve in the fiscal year ending March on the back of stronger performance by manufacturing, construction and services sectors, official estimates based on a new calculation methodology suggested Monday.
Gross domestic product grew 7.4 percent in 2014-15, the Central Statistics Office said based on calculation under a new methodology. Late January, the government revised its GDP growth figure for 2013-14 to 6.9 percent from 4.7 percent calculated in the old method.
The CSO had revised the base year for GDP data to 2011-12 from 2004-05. The agency also shifted to measuring GDP at market prices, rather than on factor cost.
Monday's report also revealed that economic growth remained strong in the three months to December despite an easing in the pace of expansion.
GDP grew 7.5 percent year-on-year in the October to December quarter, which was slower than the 8.2 percent expansion in the previous three months that was revised from 5.3 percent.
The economic expansion in the April to June quarter was revised up to 6.5 percent from 5.7 percent.
Latest figures suggest that India is outperforming China, which also grew 7.4 percent during the year 2014, but it was the weakest growth since 1990. The Chinese economy expanded 7.3 percent in the three months to December, a tad slower than India's expansion.
That said, recent revisions to GDP data and its calculation by the CSO have caused confusion among economists and policymakers, who have questioned the credibility of the figures, given the significant divergence from other economic indicators.
While the economy was seen experiencing sluggish growth until the pro-business Narendra Modi government came to power in May last year, the revisions show that it was enjoying robust growth.
"For now the key point is that these numbers are inconsistent with a number of indicators that point to a slowdown in the economy for much of the past three years, and continued slack more recently," Capital Economics' India economist Shilan Shah said.
"Ultimately, until more details on the new methodology are given, we think that the RBI will look beyond the GDP data, and focus more on other factors such as inflation, signs of fiscal consolidation and bank lending in upcoming policy decisions. On these measures, the case for further policy loosening remains strong."
The Reserve Bank of India said it could revise its GDP projections for 2015-16 after carefully considering the revisions and today's estimates.
After leaving rates unchanged last week, the RBI retained the growth estimate for 2014-15 at 5.5 percent using the old GDP base. The bank forecast 6.5 percent growth in 2015-16.
During 2014-15, manufacturing growth is estimated to have improved to 6.8 percent from 5.3 percent in the previous fiscal year. Output growth in the construction sector is also seen climbing to 4.5 percent from 2.5 percent. Utility sector's expansion was forecast to double to 9.6 percent from 4.8 percent.
The growth in the financial, real estate and professional services sector is expected to surge to 13.7 percent from 7.9 percent.
Meanwhile, output growth in the mining and quarrying sector likely eased to 2.3 percent from 5.4 percent.
The growth in the agriculture, forestry and fishing sector is estimated to have dropped to 1.1 percent from 3.7 percent. Food grain production is expected to fall 2.9 percent this year versus a 3 percent rise in the previous year.
For comments and feedback: editorial@rttnews.com