Monthly Archives: June 2017

Why It Is Important To Get The GDP Dynamics Right

We have pointed out, here and here, that the standard narrative about 2016-17 Indian GDP, that its growth was unchanged in Q3 but fell in Q4, is based on a misreading of the data. An application of a standard seasonal adjustment method to the raw figures shows that GDP growth actually declined in Q3 and recovered weakly in Q4.

One could ask the question, does this even matter? The bottom line is to observe that GDP growth in 2016-17 was about 7%, the trend rate for the last decade. Or, you could observe that there was a perceptible slowing in the second half of 2016-17. Why split hairs about differences between Q3 and Q4 and apparently esoteric statistical procedures when the conclusion is entirely clear?

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Apparent Slowdown in Q4 India GDP Is Misreading of Data

It has been widely reported that the latest data release showed a sharp slowdown in Indian GDP growth. Our analysis indicates that this is a misreading of the data, caused by the curious Indian practice of using four-quarter growth rates rather than seasonally adjusted data. After we seasonally adjust the data, we find that Q4 GDP actually rebounded, but rather weakly, and the headline slowdown in YoY Q4 growth is actually the result of the sharp Q3 decline followed by a weak Q4 rebound.

The Central Statistical Office released GDP figures for the Q4 of the last financial year on Wednesday. Although the full year economic growth came in at 7.1%, exactly what was estimated earlier, the Q4 data has been interpreted by many in the press as showing a sharp slowdown. For instance, Business Standard reports a “hard fall”,  and warns that “Q4 GDP data point to serious slowdown”.  Times of India has reported the same story. The Mint reports that

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