India's GDP Not What It Seems
http://finance.ninemsn.com.au/article.aspx?id=7954526
http://finance.ninemsn.com.au/article.aspx?id=7954526
Nomura has calculated real GDP growth at market prices compared to the official figure. The difference is a drop to only 3.7% growth rather than 8.8% growth.
The difference, says Nomura, is explained by indirect taxes and government subsidies. Taxes are falling, while subsidy payments have risen substantially. This should become apparent in governments accounts, but these are impacted by substantial licence fees received from selling telecom spectra.
The bottom line is that 8.8% might be the last of the stunning results. The data are now pointing to a slowing in subsequent quarters.
It is thus also possible the RBI may have to think twice about aggressive tightening, given domestic demand is slumping. Wages, however, are growing at the fastest rate in Asia. Last year saw 6.6% wage growth and economists are suggesting the 10% mark could be hit this year. But India's surging inflation is not simply about higher wages.