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India's GDP rebase may boost investor confidence

Friday, February 6, 2015

Subject

GDP rebase and its impact on policy.

Significance

The Central Statistical Organisation's (CSO) new estimates of national income using the April 2011-March 2012 fiscal as the base year suggest that GDP in 2013-14 grew at 6.9%. This compares with growth of 5.0% computed on the basis of the earlier National Accounts series with 2004-05 as base. Further, on the new estimates, GDP growth rose from 5.1% to 6.9% between 2012-13 and 2013-14, compared with 4.8% to 5.0% based on the earlier series, making 2013-14 a year of robust recovery rather than persisting slow growth.

Impacts

  • Revision of manufacturing data could help Modi's 'Make in India' campaign, provided it is infused with policy substance.
  • The Congress's leadership vacuum will prevent the party from harnessing the political benefits of the rebase.
  • The government's fiscal consolidation target for 2014-15 could now be easier to achieve.
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