India Is Now Fastest Growing Economy – Overtaking China – Following GDP Rebase

India has recently revised the way that it calculates its gross domestic product (GDP), and now – based on the new calculated data – the nation’s economic growth now surpasses the traditional Asian powerhouse of China.  However, the revision has been met with some criticism from economists.

Two weeks ago the Indian government changed its methodology of how it measures its GDP, as it now replaces factor costs with internationally recognized market prices.

On Monday, the Statistics Ministry in New Delhi said that the nation’s economic output is expected to expand 7.4 percent in this fiscal year, versus 6.9 percent from the previous year.

As a result of the calculation change, India’s growth figures from the previous three months were revised up sharply to 8.2 percent, from a previous figure of 5.3 percent.

The change in India’s data calculation was big news, as it now means that India has officially overtaken long-time leader China as the world’s fastest-growing economy with its 7.5 percent growth figure in the fourth quarter of 2014, compared to China’s 7.3 percent in the same quarter.

India’s new methodology of calculating its economic growth was from “rebasing”, where the real GDP is measured in accordance with prices and structure of the economy during a base year.

On January 20, India officially changed its base year from 2004-2005 to 2011-2012, as a result the nation’s GDP growth for 2013-2014 was revised up from 5.1 percent to 6.9 percent.

India’s revised way of calculating its GDP was met with criticism as the new estimate is sharply higher than the nation’s Central Bank – the Reserve Bank of India – estimate of around 5.5 percent for the year under the old method of calculation.

Other economists are pointing to economic indicators such as industrial production, trade, and tax collection figures that are suggesting that the economy is still suffering.