Three reasons why it may be premature to celebrate India’s GDP at 7.3%

Be premature.

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By Dinesh Unnikrishnan 

The 7.5 per cent growth in Gross Domestic Product (GDP) recorded in the fourth quarter (the number for the full fiscal year 2015 is 7.3 per cent) theoretically makes India the fastest growing major economy in the world, beating China (the Chinese economy grew 7 per cent in the March quarter and 7.4 per cent for the full calendar year 2014) and far ahead of other comparable economies.

For the Reserve Bank of India (RBI), which will announce its monetary policy on Tuesday, the GDP numbers are unlikely to claim any major influence on its rate cut stance. A quarter percentage rate cut is a fair expectation.

The GDP numbers are a victory for the NDA government. The NDA has already claimed victory on achieving an economic turnaround during Narendra Modi’s first year of rule. True, the status of being the fastest growing economy gives a perception boost to India before the world. But even while the prevalent mood may be one of celebration, a little caution is warranted. A check would reveal that the GDP numbers aren’t as solid as it appears just yet.

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