Will Modi government revisit GDP numbers?
Will the government withdraw the controversial GDP back series numbers it had come out with recently? There seems to be some thinking to that effect at NITI Aayog, although it is clear that the government would want to avoid any further embarrassment by resorting to such a withdrawal. Rajiv Kumar, vice chairman of NITI Aayog, had reportedly said that the government was open to making improvements if factual and methodological errors were pointed out in the calculation of data.
The man on the street may not be really concerned about a growing number that is thrown at him and would like to measure growth as something that touches his life. In that sense, the new back series, with the base year at 2011-12 (compared to the base year of 2004-05 earlier), should have gone off without much fuss.
However, it is the comparative data of the UPA and the Modi-led NDA years that has kicked up a storm in academic and political circles. This is because the data for the NDA years looks superior to the other, contrary to what has been showcased so far.
The new data says that the economy grew an average 6.7 per cent in the four years of the first term of the UPA government (2005-06 to 2008-09) as well as in its second term (2009- 10 to 2013-14), lower than the earlier estimates of 8.1 per cent and 7 per cent average growth rate (calculated with base year as 2004-05), respectively.
These growth rates are lower than the average 7.4 per cent growth rate (calculated with base year as 2011-12) seen during the first four years of the present NDA government. The glaring anomalies in this calculation have baffled many. One example is that growth during the period of economic boom (2007-08) has now been downgraded from 9.8 per cent under the old series to 7.7 per cent under the new series.
This is only a shade higher than the 6.4 per cent growth registered for the year 2013-14, the last year of the UPA government which was riddled with scams and witnessed a ‘policy paralysis’.
The revised back series numbers have surprised economists and analysts alike, especially as they contradict virtually all other data on the "real" economy, including data on corporate sales, investment, credit growth, and revenue from taxes, among others. Already, of late, there is a concern on the credibility of India’s data.
For instance, the country has been debating over the credibility of data on the jobs front, with a new way to gauge the number of jobs created using data on new additions to the government’s provident fund scheme coming under flak for not reflecting the actual job situation on the ground.
There have been conflicting theories on the impact of demonetisation, with the ministry of agriculture surprising everyone by saying that the withdrawal of large currencies announced in November 2016 actually hurt farmers, only to reverse its opinion in a matter of days, leaving one wondering what data the analysis was based on.
The biggest casualty of such a scenario of frequently changing or unreliable data is new investments, because investors cannot take a proper call regarding where to put their money in. In that context, if not a complete withdrawal, more clarity on the back series revision would be welcome.
(Courtesy of Mail Today)