GDP growth revised down to 7.2% for FY15

India's economy grew 7.2 per cent in 2014-15, a shade lower than an earlier estimate of 7.3 per cent, official data showed on Friday.

Among various segments, agriculture and manufacturing growth was revised down for FY15.

The official data also showed that in 2013-14, GDP grew at 6.6 per cent, significantly lower than the earlier calculation of 6.9 per cent. This means that growth in the first year of the Narendra Modi government was much higher than what was seen during the United Progressive Alliance government in 2013-14.

One can argue that lower growth rate in 2014-15 may give a slight push to economic growth for 2015-16 as the base effect was now lower than previous calculations. Lower GDP growth in the previous year would make year-on-year growth look higher for the current year. This is also known as base effect.

However, slower growth in 2013-14 did not push up economic expansion in 2014-15 but rather lowered it.

Sunil Kumar Sinha, Principal Economist, India Ratings & Research, said, "Lower GDP growth in FY14 means lower base. Yet, the revised GDP for FY15 has come down marginally instead of going up. In a nutshell, the data released by the CSO (Central Statistics Office) suggest that economy in the past two financial years grew slower than it was believed earlier and even though GDP growth may have bottomed out, the path to recovery is going to be slow and painful."

The growth rate for 2012-13 was also revised to 5.6 per cent, compared with 5.1 per cent earlier.

The GDP calculations are based on market prices, which include indirect taxes unlike the earlier practice of calculating it at factor cost, excluding indirect taxes.

Now, the practice of estimating GDP at factor cost has been done away with. Instead, aggregate of agriculture, industry and services comes at gross value added at basic prices, including some product taxes such as property tax.

Gross value added (GVA) has also been revised on almost similar lines. According to new data, GVA for 2014-15 now grew by 7.1 per cent against previous estimates of 7.2 per cent. Similarly, GVA for 2013-14 rose by 6.3 per cent, lower than earlier calculation of 6.9 per cent.

The 2014-15 GVA estimate was revised downwards as agriculture contracted 0.2 per cent against the previous estimates of 0.2 per cent growth. Similarly, manufacturing was shown growing at 5.5 per cent against the earlier calculation of 7.1 per cent.

The size of the economy has now been projected at Rs 124.9 lakh crore against earlier estimate of Rs 1.25 lakh crore for 2014-15. Similarly, the economy size stood at Rs 112.7 lakh crore for 2013-14 against earlier calculation of Rs 113.4 lakh crore. Per capita income stood at Rs 86,879 in 2014-15, lower than the earlier calculation of Rs 87,748.