The great Indian GDP debate, explained in five charts -Pramit Bhattacharya

-Livemint.com

If there is no way to tell which part of the economy is doing well and which is not, policymakers will continue to have to rely on rough proxies and their intuition for decision-making

A month after statisticians from the National Sample Survey Office (NSSO) published a report exposing holes in one of the key databases used in India’s gross domestic product (GDP) calculations the controversy around India’s new GDP series refuses to die down, with several economic commentators continuing to raise questions on India’s GDP numbers and the official statistical machinery .

The data storm erupted after Mint first reported the findings of the NSSO report on 8 May. The report based on a field survey of services firms showed that 16.4% of companies in the MCA-21 database were either non-traceable or closed, and another 21.4% were ‘out of coverage’ or misclassified. These results meant that two detailed reports based on the first-of-its-kind survey had to be junked

A Mint analysis suggests that some of the concerns about the accuracy of India’s new GDP series stems from legacy problems with the national accounts system in the country, which were either left unaddressed or were aggravated during the base year change exercise in 2014-15, while others spring from methodological changes made during that exercise.

The revisions controversy

In January this year, the Ministry of Statistics and Programme Implementation (Mospi) published the revised growth estimates for fiscal 2017, raising growth for that year by 1.1 percentage points to 8.2 percent, the highest in a decade. Stunned economists were unable to fathom how such a large revision could take place in a year when demonetisation had sucked out 86 percent of the cash in circulation, and evidence from other sources indicated that the economy was hit even if temporarily by that move .

In a joint statement in March, 108 economists and social scientists highlighted this issue as one of the areas of concern, suggesting that the revision might have been affected because of ‘political considerations’.

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Livemint.com, 4 June, 2019, https://www.livemint.com/news/india/the-great-indian-gdp-debate-explained-in-five-charts-1559644946510.html

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