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New method: GDP grew 7.5% in Q3; full year seen at 7.4%

After moving to a new method of calculating the country’s gross domestic product (GDP), the government today said it expects economic output to grow at 7.4 percent this fiscal year (2014-15), compared to 6.9 percent in the previous year.

The News International Team

After moving to a new method of calculating the country’s gross domestic product (GDP), the government today said it expects economic output to grow at 7.4 percent this fiscal year (2014-15), compared to 6.9 percent in the previous year.

At a press conference announcing the forecast, Ashish Kumar, ADG, Central Statistical Organisation, said the changes reflected the move to calculate GDP at market prices now instead of factor cost (as is done internationally) and moved the base from 2005-06 to 2011-12.

Under the new calculation, India may overtake China’s growth this year itself, as the Chinese central bank has forecast growth in Asia’s largest economy at 7.1 percent.

In the new method, GDP growth in the first three quarters (at constant prices) stood at 6.5 percent, 8.2 percent and 7.5 percent respectively, Kumar said.

The move to the new calculation, under which the economy has been said to grow at 5.1 percent and 6.9 percent in fiscal years 2013 and 2014, has befuddled many economists, including the chief economic advisor Arvind Subramanian  who termed it “mystifying”.

GDP at market prices starts with GDP at factor prices and adds indirect taxes while subtracting subsidies.

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