Back Series GDP Data | 01 Dec 2018

Recently the government has released the Gross Domestic Product (GDP) growth estimates for previous years based on the new method of calculation and base year (2011-12) it had adopted in 2015.

• The government adopted the recommendations of the United Nations System of National Accounts, which included measuring the Gross Value Added (GVA), and the use of new data sources wherever available. One of these data sources is the Ministry of Corporate Affairs MCA-21 database, which became available since 2011-12.
• MCA-21, an e-governance initiative of the Ministry of Corporate Affairs was launched in 2006, to allow firms to electronically file their financial results.
• The new method is statistically more robust as it tries to relate the estimates to more indicators such as consumption, employment, and the performance of enterprises, and also incorporates factors that are more responsive to current changes, unlike the old series that usually took 2-3 years to register an underlying change.

Background

• In the new series, the Central Statistics Office (CSO) did away with GDP at factor cost and adopted the international practice of GDP at market price and the GVA measure to better estimate economic activity.

• Further, the change involved bringing forward of the base year used for calculations to 2011-12 from the previous 2004-05.
• Base year revision is normally done once in five years to accommodate and factor in the changes that take place in the economic scenario of the country.
• However, this had led to the problem of not being able to compare recent data with the years preceding 2011-12. So, the back series data released recently provided the earlier years’ data using the new calculations.

New Findings

• Trends shown by the official back-data suggest that the old series under-estimated the impact of the global financial crisis on the Indian economy. It also over-estimated the rebound from the crisis.
• The new data release shows that GDP growth during 2004 - 2014 averaged 6.7%, compared with the 8.1% (2004-2009) and 7.46% (2009-2014), respectively, estimated using the older method.
• In comparison, the current government has witnessed an average GDP growth rate of 7.35% during the first four years of its term, based on the new method.
• The new data shows that, contrary to the earlier perception, the Indian economy never graduated to a ‘high growth’ phase of more than 9% in the last decade or so.
• The newer data, especially for the mining and manufacturing sectors, shows that India did not recover from the global financial crisis 2007-2008 as quickly as initially thought.

Concerns Associated

• The choice of datasets and proxies, especially those datasets that didn’t exist before 2011-12 have not been explained. For instance, for years preceding 2006, when the MCA-21 database did not exist, the CSO has used Annual Survey of Industries (ASI) data for estimating manufacturing growth without giving the details about why it was selected over other available datasets.
• The new back series data diverges significantly from the estimates made in a draft report released by the National Statistical Commission (the autonomous body that helps in collection of data by India’s statistical agencies) earlier this year.
• The report showed that growth during 2004-2014 crossed 9% on at least four occasions, and even hit 10.78% in 2010-11. The report pegged the average GDP growth during 2004-2009 at about 8.4% and 2009-2014 at 7.7%.
• However, the government clarified that this was just a draft report that used only one of the many methods in order to estimate the back series, and it was not the final number.
• The role of the NITI Aayog in the release of the statistical exercise of CSO, which comes under the Ministry of Statistics and Programme Implementation (MoSPI), has also been questioned.