Getting the GDP numbers right -S Mahendra Dev
-The Indian Express
Estimates are not perfect, but the process is revised and fine-tuned.
Former Chief Economic Adviser Arvind Subramanian’s recent paper claims that the Indian GDP growth may have been overestimated by 2.5 per cent per annum between the period 2011-12 and 2016-17. A note by Prime Minister’s Economic Advisory Council (PMEAC) rejects the methodology, arguments and conclusions of Subramanian’s paper. A study done at our institute by Ashima Goyal and Abhishek Kumar show that after removing various flaws in Subramanian’s data and procedures used, these indicators suggest official growth rates are overestimated before 2011 too. This study also shows that the GDP growth in a large number of countries is either overestimated or underestimated using these indicators. Therefore, the study rightly says that “these regressions cannot be used for predicting growth or for concluding Indian growth is overestimated or for pointing to problems in the estimation methodology”. It is better now to concentrate on the next base revision by focusing on methodology, coverage and data in estimating GDP. There is no point in saying that GDP estimation has problems because ground level realities are different using some indicators.
I was a member of the National Statistical Commission (NSC) during 2013 to 2016 (Pronab Sen was the chairman) and was part of the process in base revision. In 2015, CSO introduced a new series of National Accounts Statistics (NAS) with 2011-12 as the base year. The guiding principles for change in base are: One, revision of base year to a more recent year; two, complete review of existing data base and methodology employed in the estimation of various macro-economic aggregates and alternative data bases; and three, implementation of the international guidelines based on SNA, the System of National Accounts 2008 to the extent possible. Therefore, it was not just base revision but there were significant changes in methodologies, coverage and data.
The base revision for 2011-12 was undertaken by CSO under the guidance of the Advisory Committee on National Accounts Statistics, which constituted five sub-committees for the purpose. The reports of these committees provide a comprehensive assessment of the changes and their rationale. Improvements in GDP estimation is a continuous process. In fact, Rangarajan’s commission on NAS was appointed 20 years back to give recommendations on significant deficiencies and improving credibility of official statistics. There have been several changes in recent GDP estimation. We focus here on two issues: Ministry of Corporate Affairs (MCA) 21 data base; estimation of household sector.
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