India's gross domestic product (GDP) grew 7% in the first quarter of the current fiscal as against 6.7% in the same period last year but analysts are of the view that the data is 'overstating' the real economy.
"The official GDP data are overstating the strength of the economy, most probably by a significant margin," said Capital Economics in a note.
Even though the growth in the April-June quarter is far below 7.5% recorded in the January-March 2015 quarter, it is still above China's growth rate.
"But the GDP data remain inconsistent with numerous other indicators which suggest that, at best, the economy is in the early stages of recovery after three years of tepid growth," the note said.
Earlier this year, the Narendra Modi government had introduced a new way of calculating GDP data to match global practices. The new interpretation of data left many economists puzzled, as the picture on the ground remained weak.
In June, the government had appointed a three-member expert panel to measure the accuracy of the new GDP series used to assess economic activity in the country. The panel was asked to review the manufacturing data used to calculate the GDP growth.
"Ultimately, more clarity needs to be given and a longer back series is needed to help us gauge how well the economy is doing in a historical context. The Statistics Office has suggested that we won't get this until December at the earliest. Until this happens, economists and policymakers alike will be looking beyond the GDP data," said Capital Economics.
However, many agencies have turned cautious over India's GDP growth for the year ending March 2016, amid slow pace of reforms by the Modi government and growing external risks to its economy.
In July, rating agency Fitch had cut its growth forecast for India to 7.8% from the earlier 8% for 2015-16, saying the subdued business environment in the country needs more time to recover.
Earlier this month, Moody's Investors Service had trimmed its growth estimate for India to 7% for 2015-16, from a previous forecast of 7.5%, citing lower-than-expected monsoon rainfall witnessed across the country.
