Don’t be too quick while reading GDP numbers, says RBI Governor Raghuram Rajan

Raghuram Rajan, the governor of the Reserve Bank of India, has said that one should be cautious while reading the GDP numbers. He was referring to issues with the way these numbers are computed.

"There are all sorts of problems with the way we count GDP which is why we need to be careful," Rajan said. He was in Mumbai, speaking at the 13th convocation ceremony at the Indira Gandhi Institute of Development and Research.

"We have to be little careful about how we count GDP because sometimes we growth because of people moving into different areas," Rajan explained. "It's important that when they move into different areas, they are actually doing something which is more value added. And while we do lose some, we also gain some."

Rajan's caution has come despite India's GDP numbers continuous rise. In January last year, the Central Statistics Office (CSO) used a new method and claimed that India's real or "inflation adjusted" GDP in 2013-14 grew 6.9% as compared to the earlier 4.7%, and by 5.1% in the year before as compared to the 4.5% in the earlier system.

These sudden and sharp revisions raised some doubts about the data, even as the migration was done with internationally accepted norms, compared to the factor cost method which was in use earlier.

The raised eyebrows had more reasons, one of them being the current 7% plus growth, which appears to be out of sync with other economic indicators like revenue growth of listed firms and bank credit growth.

In 2015, India outpaced China as the world's fastest growing economy and is expected to make a growth of 7 to 7.5% this year.

Rajan was also seen praising Start-up India, Stand-up India programme by the government of India.

"The start-up India initiative that the government has taken has some extremely attractive ideas in this regard, including for example, protecting a business from inspections for three years," he said. "So, at least, let it off the ground before we inspect it -- after all, how much harm can it do in three years."