No matter what the government says, no one is sure how fast India is growing – yet again

India is among the fastest growing countries in the world. Almost all economic survey and financial institutions agree on it. What they don’t agree on, however, is just how fast India is growing. There is often a concern that India’s growth figures don’t match industry indicators, even as the government claims that its new methodology actually captures economic data better.

The debate has played out before with even the Reserve Bank of India Governor Raghuram Rajan raising doubts about the numbers. Rajan did point out though that he thought these numbers were broadly correct and later explicitly clarified that he was "happy that GDP change [was] consistently positive" and that he was "happy with GDP numbers, give or take 1%".

The government has also been doing its bit to quell all doubts by claiming that it will release back-series data to corroborate the official estimates. This move by the Chief Statistician’s Office should have put all arguments to rest but that has not happened yet.

International financial agencies as well as economists are still speculating on India’s growth and altering their targets as they go along – in some cases, depending more on other indicators from the industry rather than just relying on official GDP estimates.

Revised forecasts

On Wednesday, the newspapers reported that the International Monetary Fund has cut India’s growth forecast for the current financial year to 7.4% in the year ending March 2017. Earlier, the IMF had predicted a growth rate of 7.5% for the economy.

The IMF said that Indian economy remained “buoyant” but a cut was required due to low investment recovery. This came alongside a marginal cut in the global economic growth expectations due to the impending impact of Brexit as the IMF now expects the world economy to grow at 3.1% in the ongoing financial year.

“In India, economic activity remains buoyant, but the growth forecast for 2016-17 was trimmed slightly, reflecting a more sluggish investment recovery,” it stated in its update.

In a similar vein, the Asian Development Bank recently said that India has managed well amidst global headwinds and a marginal pick up in rural demand. The bank said that India is likely to stay on course to hit its expected target of 7.4% GDP growth this year and 7.8% in the next financial year.

“India, whose economy has shrugged off global headwinds and is on track to meet ADB’s March fiscal year 2016 (April 2016 to March 2017) projected growth target of 7.4%, supported by brisk consumer spending and an uptick in the rural economy,” ADB said

While the bank noted the slow global economy’s impact on the South East Asian countries that could result in growth obstacles, rating agency Fitch on Monday gave India a stable outlook and said that the country is likely to grow at 7.7%.

The agency said that the growth will accelerate due to the expectation of a strong monsoon, the impact of pay commission’s hike in salaries of government employees and a subsequent pickup in consumer demand.

However, Fitch maintained that all is not well with the economy and mentioned the large portion of bad loans along with slow reforms as causes of concern.

“Policy rate cuts of 150 basis points in total since January 2015 may also contribute to growth, even though weak bank balance sheets continue to impair monetary transmission,” the agency stated. “At the same time, weak private investment indicates that the economy is still not firing on all cylinders.”

Goldman Sachs is also expecting India to grow at a high 7.7% in the current calendar year. The multinational banking firm said that there has been some recovery in growth and consumption, driven by individual spending and foreign direct investment.

Another global financial services company Morgan Stanley said the Indian economy provided some “positive surprises” in the form of “stronger-than-expected” GDP numbers released earlier this year. The company is now expecting the economy to grow at 7.7% as compared to its previous estimate of 7.5%.

This matches with estimates of rating agency CRISIL which expects 7.9% growth in the financial year 2016-17, based on a good monsoon that it thinks will boost India’s consumption and investment.

Finance Minister Arun Jaitley in April had said that India could even grow at 8.5% in the next financial year. However, India’s GDP data has not yet convinced a section of financial organisations and economists who suggest taking it with a pinch of salt. The global financial company HSBC flagged these concerns as well and said earlier this month that India’s growth could slow down this fiscal to 7.4% and further drop to 7.2% in the next year.

Moreover, it too pointed out that India’s GDP data is “fraught with methodological concerns”, according to the Economic Times, and after HSBC’s own calculations, the actual growth turned out to be in the region of 6% to 6.5% – at least 1% below the official estimate.

India needs to “activate stalled engines” of the economy to maintain the 7.6% growth it clocked last year, the World Bank had said in June. Along with two consecutive years of drought, private and public investment had not “performed to potential,” the organisation had pointed out.

These organisations are not alone in their concerns about the GDP numbers, a recent report produced by the Bureau of Economic and Business Affairs of the United States State Department said that Indian growth numbers might be overstated. The report, “Investment Climate Statements for 2016”, released in June, added that the India has been “slow to propose other economic reforms that would match its rhetoric”.

“Ostensibly, India is one of the fastest-growing countries in the world, but this depressed investor sentiment suggests the approximately 7.5 per cent growth rate may be overstated,” the report said.

Just this month, global economist Ruchir Sharma who heads emerging markets equity division at Morgan Stanley spoke to the Economic Times and said that anomalies in India’s GDP numbers are a result of “incompetence”.

“In India you’re having incompetence because the statistics bureau there is applying a new methodology not having tested it well,” he said. “It’s quite possible it could be a basic error like getting the GDP deflator wrong. It’s credibility in a different way, it’s one of incompetence not one of managing the numbers as such.”

Arvind Subramanian, chief economic adviser to the finance ministry , however remains optimistic about the future. “We are already growing at 7% plus, so I think that 8% to 8% plus growth for the next 10 years is imminently doable, if the international economic environment cooperates,” Subramanian said at the launch of a book India’s Long Road: The Search for Prosperity by Vijay Joshi, Emeritus Fellow at Oxford University.