Real GDP is growing at 5%, not 7.1%4 min read . Updated: 14 Mar 2016, 11:41 PM IST
The deflator, based on wholesale price index, is understated, and hence the real growth is overstated
Are our gross domestic product (GDP) numbers credible? Many commentators have expressed their doubts. But no one has yet identified problems with the Central Statistical Organisation’s (CSO) methodology. This is because they have been looking in the wrong place. The problem is not, as many have suspected, in the nominal numbers. It lies in the system for constructing the deflators. This methodology is flawed, yielding exaggerated estimates of the speed at which the economy is growing. As a result, policy decisions such as the Union budget are taken on the basis of a “broken speedometer".
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