According to the new data presented by the chief statistician T.C.A. Anant earlier this month, India grew much faster in the past year and a half than estimated earlier. So, the "policy-paralysed" last year of the UPA may not have been that bad after all.
In 2013/14, estimates Anant, India actually grew at 6.9 per cent, and not 4.7 per cent. And in 2014/15, India will clock a growth rate of 7.4%, which is higher than China's 7.3%*. The revision happened because of a change in the methodology and because the base year was moved from 2004/05 to 2011/12.
Anant pointed out that the measurement of many sectors of the economy had become far more accurate in the new methodology, which led to changes in the growth rate - though it also lowered the size of the economy a few years ago. But, he clarified, the change in growth rates did not lead to a material difference in the total size of the GDP in 2013/14. It remained around $1.8 trillion or so.
The Reserve Bank of India, the World Bank, the IMF and data crunchers from other organisations generally differ on their growth estimates for India's economy. What most of them agree on is its rough size. Almost all of them concur that India's GDP in nominal terms was between $1.8 trillion and $1.9 trillion in 2013. They also agree that India is the 10th biggest economy in the world, probably just a bit bigger than Canada and certainly much bigger than Australia, Spain, South Korea, Mexico and Indonesia.
And nobody denies that India is one of the world's fastest-growing major economies - whichever way you measure it. Whether it is growing faster than China might be open to debate, but the fact that it is growing very fast for an economy this size is not in doubt.
Those are achievements to be proud of. But when reams are written on the size of the Indian economy and the speed at which it is growing, what is often glossed over is one other piece of data - that in terms of GDP per capita or income per capita, India is not in the Top 10. It is not even in the Top 20. And if GDP per capita is to be used to measure achievement, India still has a very long way to go.
Why is GDP per capita as important, if not more, than absolute GDP? The reason is that it helps in measuring two things - the economic output per person in the country and the level of income enjoyed by the country's population at an average. In fact, GDP per capita is a far better measure of the living standards of the average person in a country than GDP numbers. The World Bank puts India's GDP per capita at $1,499 in 2013 - or, roughly Rs 89,940 at the exchange rate of Rs 60 to a dollar. The Indian government estimates it at a slightly smaller Rs 74,380. The US enjoyed a per capita GDP of $53,042, Canada $51,958, Australia $67,458, and the UK $48,787. China, in comparison, did not look very good with $6,807. Still, despite having a population larger than ours, China has a per capita GDP which is over four times as big. Singapore has a GDP which is barely $291 billion, but, at $55,182, its per capita GDP is higher than even that of the US, whose GDP is 57 times bigger than Singapore's.
Unlike most developed countries, India's population is still growing extremely fast at 1.2 per cent, compared to 0.5 per cent for China, 0.7 per cent for the US, 0.6 per cent for the UK and 0.5 per cent for France. The population growth has been one of the reasons for the spurt in India's GDP, the other being more sensible economic policies adopted since 1990. The young workforce has propelled India's growth since the early 2000s. The flip side is that the population growth is also the reason why India's GDP per capita has not kept pace with those of developed countries, even though its GDP has outstripped many of them.
In the article Cut to the Chase, in the February 15 issue of this magazine, it had been pointed out that even if India grew at 10 per cent year on year, while China slowed to 5 per cent, India will continue to lag its north-eastern neighbour even 20 years hence. But if one were to change the focus from absolute GDP to GDP per capita to measure when Indians can live the kind of lifestyle that citizens in developed nations do, it needs to do two things simultaneously. One, the growth rate needs to accelerate even faster than the government currently envisages. Equally, the population growth needs to slow down so that the equation is not forever skewed.
*An earlier version of the story gave the impression that in the last quarter of 2013-14, India likely clocked a growth rate of 7.5 per cent. The correction has been made.
