Source: RBI

In nominal terms, there's no doubt India's GDP has kept on inching higher year after year over the last three decades. In fact, even in real terms, the growth has been pretty impressive. But what if the conversion factor i.e. the inflation itself is flawed? This isn't entirely impossible for the inflation we encounter in our day to day lives certainly seems higher than the official figure. How then would one assess the growth in real GDP if inflation is highly understated?

The answer lies in today's chart of the day perhaps. For it measures growth in nominal GDP in terms of its ability to buy 10 gm gold coins. As the chart highlights, the GDP to gold ratio isn't certainly a straight line. This means that some of the growth in GDP in real terms could also be due to excess liquidity sloshing around. Agreed that this may not be the most perfect indicator, but is certainly a lot more reliable in bad economic times we believe.