India’s GPD Could Hinder the RBI’s Easing Cycle

India’s economy outpaced China’s in the December quarter following changes to its gross domestic product (GDP) calculations, but analysts warn the new methodology could hinder the central bank’s easing cycle, ultimately derailing growth momentum.

“The consequent danger from mysteriously upbeat data is policymakers may mistakenly infer less [economic] slack, and hence less justifiable [policy] easing to the detriment of the nascent recovery,” warned Vishnu Varathan, senior economist at Mizuho Bank, in a note on Tuesday.  “The shifted goalposts lack mileage, comparability and policy pertinence as things stand,” he continued.

Asia’s third-largest economy expanded 7.5 percent on year in the last quarter of calendar 2014, faster than China’s 7.3 percent increase. Meanwhile the government’s statistics bureau upwardly revised fiscal 2013-2014 growth to 6.9 percent from 4.7 percent to reflect its new methodology. It anticipates 7.4 percent growth this year.


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