India’s GDP estimates mystery: Circumstances, not malice

In Economy, Macro Economy, The Print by Praveen ChakravartyLeave a Comment

In recent months, many allegations have been made about fudging of official data by government departments in both the centre and the states. How do the allegations hurt the credibility of institutions and what safeguards can be put in place? We ask experts.

India’s GDP estimates mystery: Circumstances, not malice – Praveen Chakravarty,  Senior Fellow, IDFC Institute, Mumbai.

When the Central Statistics Office (CSO) announced that India’s GDP grew at 7 per cent in the quarter during which demonetisation was implemented, it was received with bewilderment. When the CSO estimated India’s GDP growth at 8 per cent for FY16, experts and analysts lamented that it does not “feel like” an 8 per cent growth economy. All other indicators pointed otherwise – poor trade numbers, abysmal credit growth, lack of private investment and so on. The CSO attracted global criticism for putting out numbers that did not match “lived realities”. India was tainted with data fudging allegations. This is a tad unfair.

The CSO adopted a new GDP estimation methodology in 2015. It had three big changes:

  1. Change of base year which is a routine and accepted change
  2. Expanding the dataset to incorporate new measures — needed to ensure GDP adequately captures the changing nature of India’s economy
  3. Change in methodology to estimate GDP through a superior “value added” measure rather than just production of goods and services.

These three changes have rendered it impossible to reconcile current GDP estimates with past trends. The CSO has been unable to tell us what the previous years’ GDP estimates would have been under the new methodology because it is difficult to go back in time and collect new data points. There is also scepticism of the CSO’s numbers, because the new dataset has not been made public.

But insinuations of connivance or deliberate fudging of data smacks of ignorance of the institutional strength of the CSO and the technocratic professionalism of the Chief Statistician of India. As they say: ‘Do not attribute malice to what can be explained by circumstances.’

Published on 29 June, 2017 in The Print