The GDP riddle: Is economy booming or recovering?

  1. New estimates pegged the GDP significantly higher than previous estimates.
  2. But this jump was not in line with other parameters of economic activity such as corporate profit growth, credit off take etc.
  3. The new estimation methodology is in line with global norms.
  4. Where increased value addition, as against an actual increase in quantity of production, leads to a higher GDP.
  5. This approach can work seamlessly in an economy where all value addition is tracked formally and recorded in well-codified data.
  6. But for a country like India, where 93 per cent of labour works in the informal sector, this method requires a more nuanced appreciation.

New estimates demand a more nuanced understanding of economic activity.

  1. New estimates pegged the GDP significantly higher than previous estimates.
  2. But this jump was not in line with other parameters of economic activity such as corporate profit growth, credit off take etc.
  3. The new estimation methodology is in line with global norms.
  4. Where increased value addition, as against an actual increase in quantity of production, leads to a higher GDP.
  5. This approach can work seamlessly in an economy where all value addition is tracked formally and recorded in well-codified data.
  6. But for a country like India, where 93 per cent of labour works in the informal sector, this method requires a more nuanced appreciation.

By Dr V

Doctor by Training | AIIMSONIAN | Factually correct, Politically not so much | Opinionated? Yes!

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