NEW DELHI, India (AFP) — India forecast its economy will accelerate 7.4 per cent this financial year, data showed Monday, under a revised formula for calculating gross domestic product that has baffled analysts since its release last month.

The economy will grow 7.4 per cent in the year through to March, the statistics ministry announced, after earlier revising the forecast expansion to 6.9 per cent from 4.7 per cent by using the new formula.

Asia’s third-largest economy also grew at an annualised 7.5 per cent in the three months to December, statistics official Ashish Kumar said at a press conference, racing past China’s 7.3 per cent growth in the same period.

India was thought to be struggling through its worst economic slowdown since the 1980s with growth below five per cent — far too low to generate enough jobs for millions of young people.

Prime Minister Narendra Modi stormed to power in general elections last May on pledges to reform and revive the ailing economy and attract much-needed foreign investment.

But the new formula — which changes the way gross domestic product (GDP) is calculated and that officials say is closer to international standards — shows the economy has in fact been expanding fast.

The main shift is that India now measures its economic growth at market prices to incorporate ‘gross value addition’ in goods and services as well as indirect taxes.

The base year to calculate India’s GDP has also been advanced to 2011-12 from 2004-05.

But analysts say that the new data does not correlate with some other economic indicators, including last year’s industrial production figures and corporate profits.

“These numbers are much better than initially expected. They definitely come as a surprise and we are in the process of trying to understand them,” said DK Joshi, chief economist at local ratings agency CRISIL.

“The figures make India neck and neck with China,” he told AFP.

Uncertainty surrounding the new data comes as Finance Minister Arun Jaitley is set to unveil the national budget on February 28.

A faster-growing economy also risks stoking inflation, which the government and India’s central bank have been desperately wrestling to bring under control.

Monday’s data also showed manufacturing output rising 4.2 per cent in the latest quarter, while the farm sector contracted 0.4 per cent.

The sectors contributing to the predicted 7.4 per cent growth up to March are mostly service-based. The financial sector, real estate, trade, hotels and transport are all growing at over seven per cent.

Arvind Subramanian, the finance ministry’s top economic adviser, said this month he was “puzzled” by the earlier revised GDP numbers.

“I am puzzled by the GDP growth numbers and, consequently, all the constituent elements that went into constructing it,” Subramanian said in an interview with the Business Standard newspaper.

“We have to be very careful in using these numbers for policymaking.”