Former CEA Arvind Subramanian Calls India's Q3 GDP Figures 'Absolutely Mystifying'

The NSO has 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

Former Chief Economic Adviser (CEA) Arvind Subramanian expressed bewilderment on Friday regarding India's latest GDP figures, calling it 'absolutely mystifying,' and finding them challenging to interpret. India's economy expanded by a better-than-expected 8.4 per cent in the last quarter of 2023 - the swiftest growth in a year and a half.

"I want to be honest with you that the latest GDP numbers, I just simply can not 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 remarked while speaking at the India Today conclave, PTI reported. Additionally, the NSO has 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.

Expounding further, Subramanian highlighted that while these figures imply an inflation rate of 1 to 1.5 per cent, actual inflation in the economy ranges 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.

Expounding further, Subramanian highlighted that while these figures imply an inflation rate of 1 to 1.5 per cent, actual inflation in the economy ranges between 3 and 5 per cent. "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 emphasised.

Investment In Recent Quarters Significantly Decline: Subramanian

According to Subramanian, although there's a prevalent notion that the economy has become an attractive destination for investment in recent quarters and years, it has, in fact, significantly declined. "you can see foreign direct investment actually collapsed quite a bit." The former CEA questioned that if India has become such an attractive place, why there is a lack of foreign direct investment?

" Private investment and corporate investment are well below levels in 2016," Subramanian highlighted. Responding to inquiries, the former CEA stressed the need for Indians to dispel the notion that India is a big market. "We are not a very big market." Explaining further, he outlined that while India's GDP exceeds $3 trillion, the middle-class market share would be about $750 billion.

"You compare that with the global economy, it is $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 added.

Observing that no country achieved a growth rate of 7-8 per cent post-World War II without a 15 per cent growth in manufacturing exports, Subramanian remarked, "You can not get that from the domestic model." He underscored the necessity of examining whether government policies promote a level playing field for all investors.

"I can not 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 stated.

Subramanian remarked that India has once again turned inward concerning tariff policies and restrictions. During the same event, Shamika Ravi, a member of the Economic Advisory Council to the Prime Minister (EAC-PM), highlighted that private investment in India had endured significant shocks and long-term impacts due to flawed policies during the UPA government's second term.

Ravi noted that unlike most nations, where extensive government capital expenditure displaces private investment, India has consistently followed a different trajectory. "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.