India: India’s Economy Is Soaring!
On the face of it, the news Monday that India’s economy grew at a faster pace than Asian rival China was further proof that who’s up in the global economy is starting to change with the frequency of who won the weekend box office derby (SpongeBob!)
India released numbers, Monday, showing that its economy grew by 7.5 percent, outpacing China’s own robust growth of 7.3 – by comparison, the U.S. economy grew by 3.9 percent in the third quarter of last year.
The reasons for those impressive numbers are more numbers; while China has 1.36 billion people (18.9 percent of the world population), India is right behind with 1.26 billion (17.5 percent). That translates to lots of labor and lots of consumers. India has also benefitted from falling oil prices, moderate inflation and aggressive steps by new Prime Minister Narendra Modi to make doing business there much easier.
All of that has not gone unnoticed by portfolio investors who have pumped more than $7 billion this year into the country’s financial markets or the International Monetary Fund (IMF) which has predicted that India will overtake China as the fastest growing major economy in 2016 with 6.5 percent annual growth compared to China’s 6.3.
But India’s economic numbers were generated by, well, India and more than a few economists have cast a wary eye at the math and cautioned that Indian leaders may be trying to cook numbers to attract investment.
For instance, growth for the previous three months was revised sharply from 5.3 percent to 8.2. Last month, Indian statisticians made adjustments to base numbers to calculate national accounts and just like that, national GDP growth in fiscal year 2014 leaped from 4.7 to 6.9 percent.
As witnessed by investors and the IMF, questions about the numbers doesn’t seem to have significantly dampened enthusiasm for India’s direction. Then again, even the country’s chief economic adviser, Arvind Subramanian, is suggesting patience and caution.
“I am puzzled by the new GDP growth numbers,” Subramanian told the Business Standard. “Please don’t get me wrong. I am not saying these estimates are wrong in any way, only that these bear further scrutiny.”