House panel casts doubt on GDP data, questions revival
A Parliamentary panel has questioned the credibility of India’s new method to calculate national income, casting doubts of over a recently-released statistical formula that had turned up a surprise: GDP in 2013-14 grew 6.9% instead of the earlier 4.7%.
“The new series of national accounts with 2011-12 as base year has raised more questions than answers ... the reply of the ministry regarding authenticity and credibility of new series is also vague,” the Parliamentary Standing Committee on Finance said in a report, which was tabled in Parliament on Friday.
The panel has recommended the ministry of statistics and programme implementation to “examine the possibility of revising the national accounts annually to pre-empt the kind of controversies and debates that are being generated right now.”
Former petroleum minister Veerappa Moily heads the committee, which includes former prime minister Manmohan Singh and former Union minister Jyotiraditya Scindia, among others, as members.
“The committee is not convinced regarding the credibility of the figures which are showing a sudden jump in the growth rate of various sectors of economy, including GDP growth rate from 1% to 1.5%, capital formation from -3% to +3 %, which seem to contradict anecdotal evidence,” the report said.
According to earlier estimates India grew at sub-5% for two consecutive years. In January, the government released a new method to calculate national income that, however, showed that India was not in the midst of severe downturn, as was feared earlier.
Changing the base year of the national accounts periodically to factor in structural changes in the economy is an internationally accepted standard practice.
Experts, however, were not convinced about the new method, which relies on “gross value added” at various stages of the production chain, rather than a totalling up of expenditure.
The new method has forecast a 7.4% GDP growth in 2014-15, although data such as corporate income and tax collections do not show signs of turnaround.
There are anomalies as manufacturing shows an estimated 6.8% growth during 2014-15, which under factory output data, will probably be 2-3%. Likewise, the finance sector will likely expand by 13.7%, though growth in deposits and credit appears to be tardy.
“It is impossible to make judgements of trends with only 2-3 years of data,” economist Arvind Virmani said in a blogpost.
The IMF has also sent a team to India to study discrepencies in the new data.