Free Press Journal

RBI rate panel member doubts BJP’s world-beating GDP data


Mumbai: Not everyone is convinced of the rosy growth numbers that the BJP government has churned out. Among the ‘dissenters’ is Ravindra Dholakia, a member of the RBI Monetary Policy Committee, which is tasked with the responsibility of setting the key rates.

His article, co-authored with R. Nagaraj and Manish Pandya, in the latest edition of the Economic and Political Weekly, says that India probably overestimated manufacturing output while calculating economic growth that topped 8 percent in the June quarter, reports Bloomberg. The article points out that the new gross domestic product series has mostly replaced the Annual Survey of Industries with corporate financial data for estimating manufacturing output.

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This has resulted in its higher share in GDP and projected a faster growth rate compared to the older series. The government data on Friday showed manufacturing sector expanded 13.5 percent in the quarter ending in June, driving the broader  economic growth of 8.2 percent — the fastest pace for any major economy. In an election year, rosy growth figures play a big role in moulding public perception. So, the government lost no time in attributing the economy’s performance to the government’s reforms and fiscal prudence.

But Dholakia and co-authors have a loaded question to ask. “Does the new series represent a fuller description of the manufacturing value added, or is it an overestimation?” Higher manufacturing growth rate gives “rise to serious doubts about the veracity of new estimates” and is at “variance with other macroeconomic correlates,” wrote Dholakia, an external member on the monetary policy committee and a management professor. Incidentally, the Reserve Bank has maintained its full-year growth forecast at 7.4 percent, while flagging risks from high oil prices and trade tensions turning into a currency war. Dholakia has been advocating lower interest rates to support growth and was the only member to oppose a rate increase at the August meeting, Bloomberg adds.