Are GDP figures real or fake? CEA replied to Nageswaran

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GDP Data: Chief Economic Adviser (CEA) V Ananth Nageswaran has reacted amid controversy over the Gross Domestic Product (GDP) data for the April-June quarter. Nageswaran said in an article that the discrepancy of 2.8 per cent in the first quarter of FY 2023-24 is a ‘plus’ sign. This shows that the expenditure side covered only 97.2 percent of the revenue side. This does not mean that the 2.8 percent, whose details are not given, does not exist.

Senior Government Economist Rajeev Mishra has also reacted to the article. He said – this figure exists and can be interpreted in the next quarter. Similarly, negative anomalies have been observed in the last eight quarters. This means that the cost side has been overinterpreted and needs to be reconciled.

According to the article, in the long run the negative and positive aspects balance each other out. Between Q1 FY 2011-12 and Q1 FY 2023-24, the CAGR of real GDP (quarter-on-quarter) between the two outlooks (revenue and expenditure) was 5.3 percent per annum. In such a situation it is not correct to say that GDP is exaggerated. These comments of the Chief Economic Adviser (CEA) were also shared by Union Finance Minister Nirmala Sitharaman on her official account on social media platform X (earlier Twitter).

What is the matter: This article is written in the context of the ongoing debate on India’s economic performance. Princeton University professor and economist Ashok Modi expressed concern over the country’s GDP growth rate for the first quarter of the financial year 2023-24. Project Syndicate shared this article titled ‘India’s Fake Growth Story’.

In the article, Professor Modi said that Indian officials are downplaying inconvenient macroeconomic facts so that they can celebrate the numbers with flashy headlines ahead of hosting the G20 summit. However, they are playing a scandalous and dangerous game to hide the growing struggle of most Indians.

What is the logic: He argues in his article that the National Statistical Office (NSO) is using selective data, which when examined more broadly shows the GDP growth rate to be much lower than the 7.8 percent the government announced last month. He said that in reality growth is low, inequality is rising and job shortages are a serious problem. Earlier, Nageswaran had said last week that the economic growth rate in the current financial year would be 6.5 percent, despite less monsoon rains.

According to recently released figures, the economic growth rate of the country stood at 7.8 percent in the first quarter of the current financial year i.e. between April and June. It was 13.1 percent in the same quarter a year ago.

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