A Statistical twist to the way gross domestic product (GDP) is measured showed on Monday that India clocked faster growth than China in the third quarter.
According to Central Statistics Office (CSO), India clocked 7.5-per cent growth in the October-December period compared to China's 7.3 per cent.
When asked about the comparison between Indian and Chinese economies, CSO director general Ashish Kumar told news agency PTI that it is not a "beauty competition" as their (China's) economy is four to five times larger than that of India.
"Even at this growth rate of over seven per cent, it will take 20-30 years to match the size of the Chinese economy," he added.
The International Monetary Fund (IMF) last month predicted that India would overtake China next year as the fastest-growing major economy with 6.5 per cent annual growth compared with 6.3 per cent for China.
Besides, the government also forecast that annual economic growth would accelerate to 7.4 per cent in the financial year ending March 31.
The new estimate is sharply higher than the Reserve Bank of India's (RBI) growth projection of around 5.5 per cent under the old method as well as a revised 6.9-per cent growth a year earlier.
National Statistical Commission chairman Pronab Sen told MAIL TODAY, "Conceptually, this is a more refined way of computing data instead of extrapolating antiquated numbers. We are now measuring GDP by market prices instead of factor cost to take into account gross value addition in goods and services as well as indirect taxes. The base year has been shifted to 2011/12 from 2004/05."
The growth in GDP in 2010-11 was calculated based on factor cost, which has now been changed to constant prices to take into account gross value addition in goods and services as well as indirect taxes.
Besides, the base year has been shifted to 2011-12 from 2004-05 earlier.
However, this reading is at complete variance with other economic indicators like industrial production and trade data, which show that the economy is still not seeing a marked pick-up. Contesting the new set of numbers, A. Prasanna, economist, ICICI Securities Primary Dealership, questioned the credibility of the data and asked the government to explain glaring gaps.
"The government has itself been saying that tax collections are slow due to a slowdown in the economy, but the other wing of the government is saying that GDP growth has been good. That means either one part of the economy is not taxed or there is an issue with the data." Sen argued, "Over the last two years, we have been putting the tentpoles in place for a new methodology of computation by incorporating fresh data like say the National Accounts of 2008. Further, we now have access to more reliable real-time data like the ministry of corporate affairs database where earnings, expenditure and value added by enterprise of 500,000 companies is being factored into the equation. Earlier, we were looking at a paltry set of corporate data."
Sen explained that similarly there is no accurate way of measuring services data, which is now the economy's backbone.
"The best barometer is the service tax data, which provides a window on what is happening across the vertical. We have also asked the states to give us their sales tax data base which we are distilling. The turnover of trade is another metric that we are chasing down far more efficiently. Yes, some of this is contentious, but it is more realistic. Ditto for manufacturing, mining and agriculture, where a lot of time Indian statisticians for want of more accurate data were resorting to extrapolation."
Jyotinder Kaur, principal economist, HDFC Bank said, "There is clearly the need to look at the credibility associated with these numbers." The Associated Chambers of Commerce of India said that the revision is confusing as investment is yet to revive and consumer demand is not returning with a significant pace despite a sharp reduction in crude oil prices.