Can the GDP grow while production is falling?

Why are politicians constantly harping on the growth rate of our GDP, or Gross Domestic Product? GDP is a total of all the goods and services produced by the country and thus is a measure of the health of the economy. A robust growth rate gives bragging rights to the party in power although it means nothing to citizens because our comfort is dependent on our ability to earn a decent living without our lives being made difficult by arbitrary rule changes, such as the odd-even car restrictions in Delhi, or the lack of basic services, such as good roads and constant electricity supply. In terms of GDP India is apparently the fastest growing economy in the world, with the GDP growing at 7.2% in the first half of the financial year. If the economy is growing so strongly then more wealth is being created, demand must be strong and industrial output must be soaring. But other figures do not support such a conclusion. The Purchasing Managers Index for manufacturing has been falling after a spike in July and the Wholesale Price Index has been falling for over a year. The capital goods sector, which indicates new investment, fell by 24.4% and yet Consumer Prices increased by 5.6% in December. How is it possible that the economy is growing while production is going down? Private consumption provides 57% of total demand and 54% of total consumption is spent on food, which means that food accounts for 31% of total demand. Food prices for consumers have risen by 6.3% but the wholesale price of food has risen by only 0.6%. So, the bulk of the rise in food prices has been due to trading in food, writes a professor. It is this that accounts for the high GDP growth. High spending on food means that households have less money to spend on consumer items, which accounts for falling industrial output in a high growth economy. To give a more meaningful picture Ambit Capital has come out with India Keqiang Index, after the Chinese Premier Li Kiquang, which is based on auto sales, capital goods and power consumption. This gives a growth rate of around 6% year on year. Falling demand means falling profits, which hampers companies from servicing their debt. This is proved by a 14% rise in pledging of shares by promoters. The proportion of shares pledged by promoters has risen from 27% of total holdings to 47%, from Rs 1.28 trillion to Rs 2.03 trillion. The other indication of poor output is the rising volume of bad loans in public sector banks. Exports are also sliding because of the weakness in the global economy. So the trade deficit is increasing. If more capital flows out the rupee will fall and so it is. How can the economy be growing so strongly when everything is going down? All very strange.