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Growth upgrade?

LiveMint logoLiveMint 28-05-2017 Livemint

The latest data on economic output will be released by the government on Wednesday. Two issues will be important.

First, the numbers for the January-March quarter will give us a good idea whether domestic demand has recovered from the demonetisation shock. High frequency data suggests it has. Second, the official statisticians will be using the new industrial production index to estimate growth in the industrial sector while they will be using the new wholesale price index as the deflator.

Meanwhile, even previous data will have to be updated, most probably higher, given that the new measure of factory output shows that industry performed better than previously assumed.

The equity markets closed at record highs last week. The rise in share prices is being driven by a strong flow of liquidity—especially domestic liquidity—but the rally can be sustained only if strong economic growth lifts corporate earnings. That is another reason the new data should be watched closely.

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