Last week India published its Jan-Mar 2012 quarter GDP, with real growth headlined at 5.3%. However, a detailed study of the data indicates a gaping hole in imports data. The GDP data, published by the Ministry of Statistics shows imports growing at a nominal rate of 8.7% and a real rate of 2.0% for the quarter compared to the same period of last year. However, if one looks at data on merchandize imports from the Ministry of Commerce, imports have grown at 35% to 40% for goods, partly due to sharp depreciation of the Indian Rupee. There is no indication that Services imports have fallen so sharply as to reduce the growth rate of total imports to 8%.
This sounds like a grave data error leading to a published current account surplus of 2% of GDP in the quarter against a 2% deficit in the same quarter of the last year. This error of 4%, unless compensated somewhere, should lead to reduction in headline GDP growth to about 1.5%.
We believe that this error is compensated partly in low reported growth in investments at 9.3% nominal and 3.6% real yoy. Bank credit in India has grown by 17% for the year ended 31st March 2012. This does not tally with the 9% nominal growth in investment, and the gap is too big between these two data points and also other physical indicators.
Hence, we believe that when the Ministry of Statistics corrects the errors in the import data, it will revise upwards other components, mainly investments, and to some extent consumption, and the GDP growth will be finally headlined between 3.5% to 4.5%, which will tally with many other physical and nominal indicators followed by Decimal Point Analytics.
However, the question remains on the quality of data coming from the Government of India. We have seen a sharp deterioration in the dependability of data since the middle of 2009 and the only reason that we can ascribe to this is sheer incompetence.