5th Largest Economy Claim: What Is The Real GDP? Asian Paints CEO Says 'GDP Correlation Has Gone For Toss'

Amidst the heated-up ongoing Lok Sabha election, the Congress Party and the BJP Party, have left no stone unturned to challenge each other. This time the opposition's have swung the bat, bringing the debate on what is the real GDP number at the table. Surprisingly, Congress has taken its shot from the shoulders of India's largest paint company, Asian Paints whose CEO and MD Amit Syngle in an interview with Macquarie said, "The GDP correlation has gone for a toss."

Congress took a jibe at the saffron party, saying via its X handler, "Is the fifth largest economy claim based on fake GDP data?" It added, "What everyone was saying is confirmed by Asian Paints MD & CEO Amit Syngle. He said that there is no correlation between GDP numbers and underlying sectors. GDP is off by a huge margin!."

Congress shared an investor conference held on 9th May with Asian Paints. It shared the transcript which is available online as well.

As per the transcript, Syngle was asked by Macquarie to look at the paint industry as a growth as a percentage of GDP. The question from Macquarie added "And when we look at the current year in terms of value growth, and I'm taking you as a benchmark for the industry, the relationship seems to have fallen out of place."

Macquarie's question further added, "Could you give us an understanding of why this year it is different or do you see the relationship has to be revisited.?"

To that question, Syngle said, "You are correct that the GDP correlation has really gone for a toss, in the current year."

Syngle added, "I also feel that today, I am not very sure as to how the GP numbers are coming. You guys are better wizards in terms of really understanding in terms of how those numbers are coming and so on and so forth."

"And sometimes you feel that there is such a variation happening across industries," he added.

Further, the Asian Paints CEO said, "How does that GDP really correlate to the actual GDP what we are kind of talking of. So even if you look at the core sectors, whether it is steel, cement, and so forth, nowhere it is correlating with the kind of possibly overall GDP growth in terms of what we are king of talking of."

Therefore, Syngle said that he feels a nominalization of this GDP growth should need to be looked upon to find out "more realistically".

Explaining further, he said, "If we are talking of a 7% growth, whether that 7% really translates to a real-time of 5% or 4% GDP for a certain sector, and there look at extrapolating data in terms of seeing how correlation works out."

Hence, the Asian Paints CEO further said, "Even we are not kind of really correlating to the GDP in terms of looking at it, because hypothetically, if you look at a 7% kind of a GDP or 6.5% GDP, you would call it almost about 9-10% of a value growth, which would come, which possibly is a correlation, which is spoiled."

Lastly, he concluded his answer by saying, "So, we are also looking at ways and means in terms of finding out what is the real GDP."

As per the latest data, the Indian economy continues to dominate world economies by remaining resilient and above 7%. Beating estimates, India's GDP growth came to a whopping 8.4% in Q3FY24, while its full-year growth rate stood at 7.4%. The economy has even performed better than RBI's forecast of 7% in FY24. The latest GDP growth was driven by robust performance in the manufacturing and construction sectors.

In April 2024 policy, in forward-looking outlook, RBI said, " an expected normal south-west monsoon should support agricultural activity. Manufacturing is expected to maintain its momentum on the back of sustained profitability. Services activity is likely to grow above the pre-pandemic trend. Private consumption should gain steam with further pick-up in rural activity and steady urban demand."

A rise in discretionary spending is expected by urban households, as per the Reserve Bank's consumer survey, and improving income levels augur well for the strengthening of private consumption, the MPC said.

Moreover, RBI added that the prospects of fixed investment remain bright with business optimism, healthy corporate and bank balance sheets, robust government capital expenditure and signs of an upturn in the private capex cycle. Headwinds from geopolitical tensions, volatility in international financial markets, geoeconomic fragmentation, rising Red Sea disruptions, and extreme weather events, however, pose risks to the outlook.

Accordingly, RBI has predicted real GDP growth for 2024-25 at 7 per cent, with Q1 at 7.1 per cent; Q2 at 6.9 per cent; Q3 at 7.0 per cent; and Q4 at 7.0 per cent.

On BSE, Asian Paints share price traded at Rs 2840.15 apiece, down by nearly a per cent with a market cap of Rs 2,72,426.56 crore. The stock ranged from Rs 2874.05 apiece to Rs 2832.90 apiece.