The October-December GDP numbers are in and, if they are to be believed, India defied expectations and eluded top economists to retain the title of the world’s fastest-growing major economy.
Annual (GDP) growth for the period was revealed to be 7%, lower than the 7.4% of the previous quarter but higher than the 6.4% forecast by economists in the past weeks.
Why were the numbers surprising?
The numbers portrayed a healthy growth of 7% despite Prime Minister Narendra Modi’s November move of note demonetization, which outlawed 86% of the currency in circulation in the country at the time.
The IMF had predicted that India would grow at around 6% in the half-year after demonetization and most independent economists had opined that GDP growth would be between 6% and 7% for the third quarter. The fact that it was declared to be 7% took everyone by surprise.
“The numbers seems too good to be true.” – Soumya Kanti Ghosh, chief economic adviser at the State Bank of India.
The numbers go against those predicted by many international observers like the IMF and even the Economic Survey and the Reserve Bank of India. Many banks – including the State Bank of India – say that the December GDP growth rate was unnaturally high and could be revised down.
“There are widespread doubts about the accuracy of the national accounts numbers,” analysts at Capital Economics wrote. “The unexpected strength of today’s data will do nothing to allay these concerns.”