CNN Asks: How Fast Are India's and China's Economies Really Growing?

Finance and Trade
08/06/2016 08:19

China said its economy grew by 6.7% in the first three months of 2016, while India reported a remarkable 7.9% expansion for the same period. But how accurate are the figures, CNN asks. Both countries have been subject to persistent doubts over the quality of their data, leading scores of reputable economists to cast aside official measures and turn to alternative gauges instead. The issue is critical because the two countries account for 16% of world GDP, or about $13 trillion. And they are the two most critical diamond markets after the United States.

India's statistics bureau changed the way it calculates the size of the economy in January 2015 and straightaway "the pace of growth went from mediocre to eye-popping". Officials have defended the change, arguing that the new method is far more rigorous, and incorporates crucial data from the corporate sector that only recently became available. Critics of the statistics agency, however, say the new GDP numbers lack credibility because they diverge so dramatically from indicators such as industrial production, investment spending and exports.

T.C.A. Anant, India's chief statistician, acknowledged that the bureau's work was not perfect by saying: "The question is, would you rather walk with your eyes shut or with a pair of spectacles which are very dirty? The answer is often that you would wear spectacles which are dirty."

While India has engaged with critics, China has been largely silent in the face of sustained questioning. "Some economists argue that China's data is far too smooth, and almost never deviate from the Communist Party's targets. There are also concerns over a lack of independence at the country's statistics agency." The doubters gauge the health of China's economy by looking at factors such as electricity output, freight shipments and seaport cargo volumes which indicate that the economy is actually growing by a far lower 4% to 5%. Indeed, even Prime Minister Li Keqiang has described official economic data as "unreliable". "When Li was a provincial official in 2007, he told the U.S. ambassador that official GDP statistics were 'man-made' and should be used for 'reference only'," the report concludes.