New Delhi: India's economy grew faster than China in the quarter through March, data showed on Friday, but a sharp downward revision for the previous quarter has added to doubts about the accuracy of a new method used to measure economic activity.
The new method measures economic activity by market prices instead of factor costs, to take into account gross value addition in goods and services as well as indirect taxes.
Government statisticians say this conforms with global practice and helps demonstrate structural changes in the economy.
However, they failed to explain several gaps in the new GDP data, leading to confusion that risks wrong-footing financial markets and policymakers.
Friday's data compounded the problem. Headline GDP accelerated from the previous quarter but another measure of economic activity in the data showed growth slowed down to 6.1 per cent in the last quarter from 6.8 per cent in the December quarter.
"There are methodological issues," said D K Joshi, chief economist at Crisil. "That is why there is a variance between the volume indicators available at the ground level and value indicators which are being increasingly used in the computation of the GDP."
The Reserve Bank of India (RBI) has also voiced caution over the new series. RBI Governor Raghuram Rajan said earlier this week that the economy was still slow in picking up. The RBI is widely expected to cut interest rates for the third time this year at a policy review on Tuesday.
"These numbers should not influence the central bank," said Mr Joshi, who expects a 25 basis point rate cut on June 2.
India's economic outlook has improved over the past year. It was on the brink of losing its investment grade credit ratings midway through last year but is now widely seen as a potential engine of global growth.
By any measure, its performance compares favourably with many. Both the United States and Brazil reported economic contractions in the March quarter.
But few believe India is running on full steam. Around 60 per cent of the economy is not showing signs of improvement from the slowdown, said Pranjul Bhandari, chief India economist at HSBC.
Finance Minister Arun Jaitley said it is absolutely clear that the economy is in recovery mode.
Asia's third-largest economy grew 7.5 per cent year-on-year in the last quarter, outstripping China's 7 per cent growth in the same quarter and beating a Reuters poll of economists who forecast 7.3 per cent growth.
The new method measures economic activity by market prices instead of factor costs, to take into account gross value addition in goods and services as well as indirect taxes.
Government statisticians say this conforms with global practice and helps demonstrate structural changes in the economy.
However, they failed to explain several gaps in the new GDP data, leading to confusion that risks wrong-footing financial markets and policymakers.
Friday's data compounded the problem. Headline GDP accelerated from the previous quarter but another measure of economic activity in the data showed growth slowed down to 6.1 per cent in the last quarter from 6.8 per cent in the December quarter.
"There are methodological issues," said D K Joshi, chief economist at Crisil. "That is why there is a variance between the volume indicators available at the ground level and value indicators which are being increasingly used in the computation of the GDP."
The Reserve Bank of India (RBI) has also voiced caution over the new series. RBI Governor Raghuram Rajan said earlier this week that the economy was still slow in picking up. The RBI is widely expected to cut interest rates for the third time this year at a policy review on Tuesday.
"These numbers should not influence the central bank," said Mr Joshi, who expects a 25 basis point rate cut on June 2.
India's economic outlook has improved over the past year. It was on the brink of losing its investment grade credit ratings midway through last year but is now widely seen as a potential engine of global growth.
By any measure, its performance compares favourably with many. Both the United States and Brazil reported economic contractions in the March quarter.
But few believe India is running on full steam. Around 60 per cent of the economy is not showing signs of improvement from the slowdown, said Pranjul Bhandari, chief India economist at HSBC.
Finance Minister Arun Jaitley said it is absolutely clear that the economy is in recovery mode.
Asia's third-largest economy grew 7.5 per cent year-on-year in the last quarter, outstripping China's 7 per cent growth in the same quarter and beating a Reuters poll of economists who forecast 7.3 per cent growth.
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