With the Prime Minster now confessing that India's growth rate will be 7 per cent not 8.5 per cent as envisioned by almost every policymaker it's now official: India's economy is slowing.

What made the Prime Minister put his imprimatur on this GDP rate, after so many policymakers, in one way or another, went out on a limb to convince anyone listening that GDP would not fall far below that magical figure of 8 per cent? Two months ago, Dr C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council, stuck bravely to the higher forecast of 7.5-8 per cent in the face of evidence of falling output.

The Planning Commission Deputy Chief, Mr Montek Singh Ahluwalia, preferred leaping over current uncertainties to focus on the long haul: over the next 20 years growth would average 8-9 per cent.

The decisiveness of the Prime Minister's pronouncement may have also been motivated by the fact that even at a lowered rate of 7 per cent India still stands tall.

The most powerful nation in the world, the US is slated to grow just 2.6 per cent in 2012, Sweden alone among the European nations roared in 2011 yet its growth did not exceed 4.6 per cent. Japan's third quarter growth, rebounding over the previous quarters, was lowered to 5.6 that set OPECD rates at just 0.6 for the period.

Judging by numbers then, India is on the fast track and that is the message Dr Singh wants to get across to the stakeholders who might just be gnawing at their fingernails about what is going to happen with high interest rates higher raw material prices and falling consumption demand.

But what truth does the fact reveal? GDP rates reflect slowing investments, consumption and credit growth.

Behind numbers

But these apparent causes are really the outcomes of an economy reaching the limits of its capabilities. Purchasing power is growing far slower than can sustain levels of consumption enough to warrant higher growth, because employment hasn't been growing. Firms cannot sell the same urban consumer two fridges or four houses or three cars. It's less of a headache to import Chinese capital equipment than manufacture your own.

Europe suffers a demographic handicap: a small youthful population supports an unproductive ageing population. In India, the demographic dividend is turning into a loss as the large youthful but unemployed population is, indirectly or directly, supported by an unproductive but pensioned population.

Numbers do not reveal reality; they hide it.

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