Statistical stir: The great Indian GDP controversy does not have to arise

Copyright © HT Digital Streams Limit all rights reserved. Opinion The Ministry of Statistics and the current leadership of the program (MOSPI) are eager to avoid past mistakes. (Mint) Summary action is eventually done by the Indian Ministry of Statistics that could be started a decade ago. It would have saved a lot of energy to disputes over the reliability of our economic growth. Ten years after the Indian Last Gross Domestic Product (GDP) series was released, the Union Ministry of Statistics and Program Implementation (MOSPI) announced the release of a revamped series next year. The new series will replace one of the most controversial national accounts in the country’s history. It is perhaps a good time to understand how and why India’s current GDP series has become so controversial. Immediately after the GDP series was released in early 2015 (with 2011-12 as the base year), economists and policymakers began to question the accuracy of the numbers, because it seemed to contradict other economic indicators. Also read: India’s GDP Growth Reviews should not raise eyebrows: It is a routine -the controversy that made a sharper turn when one of the experts involved in the review exercise (the economist R. Nagaraj) said that he was not consulted during the finalization of the methodology. Mospi officials responded to that criticism. But questions about the new series have continued, with users causing doubts about other changes in the new series. As the technical debate progressed, the issue also obtained a political color. Since the new series was launched shortly after a new government led by Narendra Modi in mid -2014, some commentators have smelled something wrong. The pressure of the Prime Minister’s Office (PMO) led MOSPI to overestimate the GDP growth rate, these critics feared. The reality was completely different. In the early days of the new GDP series, the PMO was not entirely unsympathetic for its concerns about its integrity. In April 2015, the PMO sent a note to MOSPI who raised questions about the potential “oversets” of GDP and asked the ministry officials to take “appropriate” action. This letter was part of the records obtained by this author under the Right to Information (RTI) Act. The note compiled by two former finance ministry officials (R. Gopalan and MC Singhi) was originally sent to Nripendra Misra, then general secretary at the PMO. Also read: GDP Growth: India’s latest economic data at the time raises a variety of emotions, the head of the Finance Economic Advisor, Arind Subramanian and Reserve Bank of India, Governor Raghuram Rajan both doubted the new series. This criticism was not considered politically unpleasant, because it relates to years when the opposition was in power. But the government’s tolerance of such criticism arose as the years progressed and its own growing record was examined. Subramanian’s efforts to discuss this issue in the 2017-18 economic recording were fluned by the PMO, former financing secretary Subhash Chandra Garg in his book also claimed policy. About this time, the Niti Aayog became involved in the review of GDP methodology and in preparing a setback series. According to two people with direct knowledge of the matter, the government’s thinking was the growing record of the previous government. When the Back Series was released by the Niti Aayog chief in 2018, it “corrected” the growth rate of the previous regime, which contradicted an “experimental” that was previously published in a national statistical commission report. The Aayog’s involvement in a technical exercise brought serious doubts to the back. If the Aayog was aimed at burning the economic record of the ruling regime, it only deepened its credibility. Also read: TCA Anant: How India’s statistical system can win the ongoing war war, a poor statistical system has not helped. By the time the GDP numbers were revised in the 2014-15 financial year, India’s statistical system was already in a fragile form, as I argued earlier (see ‘India’s Statistical System: Past, Present, Future,’ Carnegie Endowment for International Peace Working Paper, June 2023). National accountants had to bridge the gaps in existing databases using heroic assumptions. These assumptions did not go unnoticed. In particular, questions have been asked about the use of formal sector empowered to estimate the growth of the informal sector; the method of deflation used to calculate the actual (inflation-adjusted) growth rates; the manner in which an untested database of the submission of the company (MCA-21) was plugged into the national accounts; and the assumptions used to deduce the sectoral and regional shares of national production. The questions come from a diverse multitude of users, from financial analysts and academic economists to policymakers and statisticians of the state government. Also read: India must strengthen its statistics for a new era of data-driven management. The unconvincing answers of MOSPI officials to these questions just further crushed the waters. Much of the controversy could be avoided if Mospi started an independent audit of the national accounting system. Even if the MCA-21 database was released into a machine-readable format, it would have contributed to a few concerns. But unfortunately the leadership of Mospi chose to avoid the road, and instead offered lamb excuses as to why the raw data could not be published. Even the ‘Sources and Methods’ document that typically follows each GDP base year review is not released. The silver lining of this is that the government seems to have learned its lesson from that episode. The current leadership of Mospi is eager to avoid past mistakes. It seems not only invested in determining the gaps in India’s current statistical building, but also to make the country’s statistical system more transparent. This is the first of a two-part series on India’s GDP review process. The author is a Chennai-based journalist. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #GDP #GDP Data #indian Economy Mint Special