Reserve Bank of India Switches Back To Gross Domestic Product To Measure Indian Economy

Written By: Archana L
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The Country's Central Bank - Reserve Bank of India has switched back to the Gross Domestic Product (GDP) based measure to offer growth estimates from the Gross Value Added (GVA) methodology, citing global best practices, reports from PTI.

RBI Switches Back To Gross Domestic Product To Measure Indian Economy

The government had started analyzing the growth estimates using GVA methodology from January 2015 and had also changed the base year to 2018 starting from January.

GVA model gives a picture of the state of economic activity from the producer's side or from the supply side, the GDP model gives the picture from the consumer's side or from the demand perspective.

Deputy Governor of RBI Viral Acharya said the switch to GDP is mainly to conform to international standards.

"Globally, the performance of most economies is gauged in terms of gross domestic product (GDP). This is also the approach followed by multilateral institutions, international analysts, and investors, and primarily they all stick to this norms because it facilitates easy cross-country comparisons," Acharya told reporters at the customary post-policy presser.

Even the Central Statistical Office (CSO) has started using GDP as the main measure of economic activities since January 15 this year, he added.

"So, even though there are good economic reasons to employ GVA as the supply side measure of economic activity, we have decided to switch to GDP-based model," Acharya said.

In the first bi-monthly policy of the new fiscal year 2018-2019 wherein it left the key rates unchanged at 6 percent citing rising inflation worries in the first half, RBI said GDP is projected to strengthen from 6.6 percent in the fiscal year 2018 to 7.4 percent in the fiscal year 2019-- with the economy clipping at 7.3 per cent - 7.4 per cent in H1 (first half) and at 7.3 percent - 7.6 per cent in H2 (second half) with risks evenly balanced.

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