Q3 GDP numbers absolutely mystifying, difficult to comprehend, says former CEA Arvind Subramanian

New Delhi, March 15

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Former chief economic adviser Arvind Subramanian on Friday said India’s latest GDP numbers are ‘absolutely mystifying’ and difficult to comprehend.

India’s economy grew by better-than-expected 8.4 per cent in the final three months of 2023 — the fastest pace in one-and-half years.

“I want to be honest with you that the latest GDP numbers, I just simply cannot understand them.

“I say that with genuine respect and things. They are absolutely mystifying. They don’t add up. I don’t know what they mean,” Subramanian said while speaking at the India Today conclave.

The NSO has also revised GDP estimates for the first and second quarters of this fiscal to 8.2 per cent and 8.1 per cent from 7.8 per cent and 7.6 per cent, respectively.

Elaborating further, Subramanian said while the implied inflation in these numbers is 1 to 1.5 per cent, actual inflation in the economy is somewhere between 3 and 5 per cent.

“The economy is growing at seven and a half per cent, even though private consumption is at 3 per cent,” he pointed out.

And in the latest data, Subramanian said errors and omissions, which are not accounted for, are actually about 4.3 percentage points out of the estimated 7.6 per cent growth for FY24.

“So it’s a lot of stuff about the numbers which you know, I don’t understand. I am not saying these are wrong. That’s for others to judge,” the former CEA said.

According to Subramanian, while the buzz is that the economy has become a very good place to invest in, in the last few quarters, and last few years, it has actually declined sharply.

“… you can see foreign direct investment actually collapsed quite a bit.”

The former CEA wondered if India has become such an attractive place, why is not there more foreign direct investment.

“ Private investment, corporate investment is well below levels in 2016,” Subramanian pointed out.

Responding to a question, the former CEA noted that Indians really need to disabuse themselves of the notion that India is a big market.

“We are not a very big market.”

Elaborating further, he said while India’s GDP is over USD 3 trillion, the middle class market share would be about USD 750 billion.

“You compare that with the global economy, it is USD 20 -30 trillion. We are making the mistake now of thinking that we can grow based on the domestic market, which I think is a fatal error of judgment,” Subramanian said.

Noting that no successful country in the post World War period achieved 7-8 per cent growth rate without 15 per cent growth in manufacturing exports, he said,”You can not get that from the domestic model.”

The former CEA observed that there is a need to examine whether the government policy is creating a level playing field for all investors or not.

“I cannot understand why, despite the hardware being done, despite the banking system being cleaned up, despite the China plus one opportunity, our private investment is stuck,” he said.

The eminent economist observed that India has turned inward once again, in terms of the tariff policy, in terms of restrictions, and so on.

Speaking at the same event, Economic Advisory Council to the Prime Minister (EAC-PM) member Shamika Ravi said that the private investment in the country had seen tremendous shocks and a long-term impact due to disastrous policies under the second term of the UPA government.

Ravi said unlike most countries, where major capex by the government crowds out private investment , India is one country that has never followed that average path.

“If you look at the data of the last 50 years in India, growing capital, expenditure by the government always crowds in private investment,” she added.