Good news! India is the world's fastest growing economy

India on Monday forecast that annual economic growth would accelerate to 7.4 per cent in the year ending in March after its statisticians changed the way they measure Asia's third-largest economy.

The new estimate is sharply higher than the Reserve Bank of India's (RBI) growth projection of around 5.5 per cent under the old method as well as a revised 6.9 per cent growth a year earlier

. Under the new method, the economy grew 7.5 per cent in the quarter ending in December, outpacing China's 7.3 per cent growth in the latest quarter and making India the fastest growing major economy in the world.

The revisions mark a dramatic turnaround for an economy that barely a fortnight ago was assumed to be still struggling to gather momentum under Prime Minister Narendra Modi's reform-minded government.

Prior to Modi's election last May, the economy had endured its weakest phase of growth since the 1980s.

The apparent recovery is, however, in large measure due to changes both in the way authorities calculate gross domestic product (GDP) and the base year.

India now measures GDP by market prices instead of factor cost, to take into account gross value addition in goods and services as well as indirect taxes.

The base year has been shifted to 2011/12 from 2004/05.

The reading, however, is at odds with other indicators such as industrial production and trade data, which suggest the economy is still suffering from slack.

A. Prasanna, economist at ICICI Securities Primary Dealership Ltd, questioned the credibility of the data and asked the government to explain glaring gaps.

"The government has itself been saying that tax collections are slow due to a slowdown in the economy, but the other wing of the government is saying that GDP growth has been good," he said.

"That means either one part of the economy is not taxed or there is an issue with the data." GDP growth for the first half of fiscal 2014/15 was also recalculated and revised up to about 7.4 per cent from the 5.5 per cent reported earlier.