India's economy grew at 7.3% in 2014-15

Published: May 29, 2015
India's growth rate for the year ended March 31, 2015 was slightly lower than the government's own forecast of 7.4 percent. PHOTO: AFP

India's growth rate for the year ended March 31, 2015 was slightly lower than the government's own forecast of 7.4 percent. PHOTO: AFP

MUMBAI: India posted annual growth of 7.3 per cent on Friday, overtaking China in the first three months of 2015 as analysts warned further measures were needed to boost the economy.

The growth rate for the financial year that ended March 31, 2015 came in slightly lower than the 7.4 per cent that Indian finance ministry had predicted back in February.

But the news that Asia’s third-largest economy grew by 7.5 per cent in the fourth quarter, overtaking China, is a major boost for Prime Minister Narendra Modi who completed his first year in office this week.

India’s giant neighbour posted growth of 7.0 per cent for the first three months of 2015.

Friday’s figures were the first Gross Domestic Product data to be released since the government introduced a revised formula for calculating GDP that has baffled analysts.

“The real economic momentum is not encouraging,” Shubhada Rao, chief economist at YES Bank, told AFP, indicating the Reserve Bank of India was almost certain to reduce interest rates for on Tuesday for a third time this year.

“Key sectors like agriculture and construction are slowing down. The GDP number is really being supported largely on the basis of strong tax collections.

Read: Pakistan’s economy to fall in 2015 as South Asian economies strengthen: UN forecast

“The government now should move to arrest the slide in economic momentum and support growth. A 25 basis point cut from the RBI is very much on the cards,” she added.

India’s central bank has already cut interest rates twice this year by a total of 50 basis points to 7.50 per cent.

Modi’s right-wing government, which swept to power in general elections last May on pledges to boost a flagging economy, wants RBI governor Raghuram Rajan to slice more points off the benchmark repo rate, the level at which it lends to commercial banks.

The governor has made controlling inflation a priority and has it well within the RBI’s target of six percent.

“With inflation staying soft, the case for the central bank lowering rates by a quarter percentage point is very much the policy prognosis,” Dharmakirti Joshi, chief economist with rating agency Crisil, told AFP.

Joshi added that the economic activity on the ground “wasn’t matching” the rate of growth, suggesting that analysts remained unconvinced about the new way of calculating the GDP numbers.

Read: India raises objections over China-Pakistan Economic Corridor

India’s government changed the way it calculates GDP back in January, with officials saying the new method was closer to international standards.

The main change is that India now measures its economic growth at market prices to incorporate “gross value addition” in goods and services as well as indirect taxes.

The base year to calculate India’s GDP has also been advanced to 2011-12 from 2004-05.

But analysts say that the new data does not correlate with some other economic indicators, including last year’s industrial production figures and corporate profits.

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Reader Comments (11)

  • Saif
    May 29, 2015 - 11:13PM

    great so finally India has overtaken China as per economy is concerned ..hope in 10 yrs time India will march ahead of China !Recommend

  • Puskar
    May 30, 2015 - 1:51AM

    PM Modi needs to implement more reforms for faster growth. BJP needs to ensure that GST bill, land reforms, opening more sectors to FDI, opening agriculture to GM crops etc are passed without delay for faster growth. India has the potential to grow at 9%-10%. We need higher growth rates to create more employment for our huge population. This will also ensure that Modi is elected for a second term in 2019 and Congress gets buried for a long long time (hopefully forever).Recommend

  • Puskar
    May 30, 2015 - 5:19AM

    PM Modi needs to step up reforms. BJP needs to ensure that GST bill, land reform, opening up FDI etc are passed without delay. We have the potential to grow 9%-10%. This will create more jobs for our huge population and also ensure Mr.Modi gets a second term in 2019.Recommend

  • Narendra Modi
    May 30, 2015 - 7:51AM

    Where are my third world Pakistani friends? Want to leave your poor country and settle in India? The next super power…proved by the above articleRecommend

  • bharat
    May 30, 2015 - 9:06AM

    I am an entrepreneur and can confirm one fact. The companies earnings are way more than they report here to pay lesser tax. India’s growth is very near 9 % making it the fastest rising Major economy in the world.With a young population we will grow for decades.Recommend

  • Haider
    May 30, 2015 - 9:59AM

    Congratulations India and Pakistan should increase its pace as well
    @Narendra Modi
    Sorry I am happy in Pakistan.I am a beef lover.So living better in PakistanRecommend

  • Ridwan
    May 30, 2015 - 11:34AM

    What the article doesn’t sufficiently address is that India’s calculations are not trusted by economists. They instituted a new method to calculate gdp growth – basically a truck by BJP to make growth look better Recommend

  • Ridwan
    May 30, 2015 - 11:36AM

    @Narendra Modi:
    The article makes clear that India’s gdp calculations aren’t trusted by economists. It’s basically a trick played by BJP economists to make economic growth look much stronger. And it looks like it’s fooling the indian public.Recommend

  • Engineer
    May 30, 2015 - 12:24PM

    @Ridwan The GDP calculations were in line with today’s market prices. Every country calculates GDP in that way. Before GDP was calculated by a old method which no country was using. Recommend

  • ahmed wani
    May 30, 2015 - 12:51PM

    @ridwan………ur master china uses same data…so if both countries use previous formula also India will be ahead….One more fact…Every year India is adding a pakistan GDP in its already existing njyy….Recommend

  • SAY
    May 30, 2015 - 2:14PM

    I doubt your sensibilities my dear pakistani friend!
    Do you think BJP , a ruling party of a nation which is 3rd largest economy in world can fool all economists and policy makers and foreign investors by playing a trick?
    Are you sure World experts and policy makers would let it go India with this trick?
    Can pakistani experts except (eg. Car running on water kit) supporters prove this and expose INDIA on world stage, will they leave such an opportunity?Recommend

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