India's GDP rebase may boost investor confidence

Subject

GDP rebase and its impact on policy.

Significance

The Central Statistical Organisation's (CSO) new estimates of national income using the April 2011-March 2012 fiscal as the base year suggest that GDP in 2013-14 grew at 6.9%. This compares with growth of 5.0% computed on the basis of the earlier National Accounts series with 2004-05 as base. Further, on the new estimates, GDP growth rose from 5.1% to 6.9% between 2012-13 and 2013-14, compared with 4.8% to 5.0% based on the earlier series, making 2013-14 a year of robust recovery rather than persisting slow growth.

Impacts

• Revision of manufacturing data could help Modi's 'Make in India' campaign, provided it is infused with policy substance.
• The Congress's leadership vacuum will prevent the party from harnessing the political benefits of the rebase.
• The government's fiscal consolidation target for 2014-15 could now be easier to achieve.