Indian Finance Minister dismisses critics of India growth story

File photo of Indian Finance Minister Arun Jaitley (R) with US Treasury Secretary Jacob Lew . India forecast its growth will accelerate this fiscal year under a revised method for calculating gross domestic product that has confused economists since it was unveiled in early 2015 [Xinhua]

Indian Finance Minister Arun Jaitley in New York dismissed critics of India’s new way of calculating GDP.

There is “no serious substance to charge that GDP data is misleading. A lot of people can’t digest that India is doing well”, India’s CNBC TV18 quoted Jaitley in his interaction with US investors on Thursday.

The Indian economy grew 7.5 per cent year-on-year in the last quarter outstripping China’s 7 per cent growth in the same quarter.

The new method of calculating India’s GDP measures economic activity by market prices instead of factor costs, taking into account gross value addition in goods and services as well as indirect taxes.

Economists, including the Indian government’s Chief Economic Advisor Arvind Subramaniam and the Central Bank Chief Raghuram Rajan have warned against rushing in to use the new numbers to craft policy.

“I am puzzled by the new GDP growth numbers. The revised numbers show GDP growth rose from 4.7 per cent to 5.1 per cent for 2012-13 and from five per cent to 6.9 per cent for 2013-14. This means acceleration in GDP growth of 1.9 percentage points in 2013-14, just by comparing the new numbers across time. This is mystifying because these numbers, especially the acceleration in 2013-14, are at odds with other features of the macro economy,” Subramaniam told Indian daily, the Business Standard.

Meanwhile, the Indian Finance Minister, on Thursday, also claimed that economic reforms being planned by his government can bolster India’s economic growth rate above the 7-7.5 per cent range.

“Because a series of reform fixes which are in the pipeline and are to be implemented, we have now identified all the problem areas, and I think one by one as we go resolving most of them, hopefully we should reach what our destination targets are,” he said.

The World Bank’s forecast says Indian will grow 7.5 per cent this year.

The Finance Minister also asserted that government holding in banks “can be brought down to 52 per cent but only in phases”.

Indian Prime Minister Narendra Modi’s administration had last year approved a plan to pare the government’s stake in state lenders to up to 52 per cent to help them meet their capital needs.

The government holds stakes ranging from 56 per cent to 84 per cent in 24 state-run banks that account for 70 percent of total outstanding loans of about $1 trillion in Asia’s third-largest economy.

The state-run lenders are estimated to need as much as $60 billion in capital over the next four years to meet upcoming global regulations and to build a buffer against rising bad loans.

 

 

TBP