Opinion | The irrelevance of GDP growth estimates4 min read . Updated: 28 Aug 2018, 09:40 AM IST
The GDP estimates are an example of govt interference in the statistical system
The report of the committee on real sector statistics constituted by the National Statistical Commission (NSC) released earlier this month was met with a swift response by the ministry of statistics, which is tasked with bringing out statistical publications. It sought to embargo its own publication in the public domain within a week of the release. The report on real sector statistics was part of a regular exercise by the NSC on several aspects of official statistics such as prices, real sector and financial sector.
The committee on real sector statistics made several recommendations on different aspects of official statistics, including agricultural and industrial statistics. But the reason it got undue attention was that the committee also attempted to create a back series for the gross domestic product (GDP) data for earlier years, that is for years before 2011-12. The revised series based on the 2011-12 base prices tried to create the back series of GDP for earlier years using production shift approach. The resulting series does not show a large difference between the old series based on 2004-05, with GDP growth from the revised back series only marginally higher than that from the 2004-05 series. But it led to a debate on which government did better in terms of GDP growth with both the current and previous finance ministers joining in to show better growth during their respective tenures. Such a response was expected given that recent years have seen GDP growth being highlighted as the sole, or at the least the most important, metric of judging the performance of the economy.
While the debate may have been put in cold storage for the time being after the withdrawal of the report by the ministry of statistics, the issues are far from settled. The issues are not just about whether GDP growth during United Progressive Alliance (UPA) was higher or lower, but also on the credibility of institutions. The ministry of statistics has so far not released the official estimates of back series of GDP. The normal practice is to release the back series around the same time that the series is updated. As the report mentions, the Central Statistical Office (CSO) has also created a back series, which has not been released to the public. It is important to remember that the office of chief statistician of India has been lying vacant since January of this year.
The GDP estimates are only one among many examples of government interference in the statistical system. The same is true of employment estimates where the inaction and indifference of the government has contributed to a vacuum in availability of official data. So is the case with statistics on other important indicators of the economy. The data on farmer suicides, for instance, has not been released since 2016. The government has refused to set up a committee on the poverty line, which makes it difficult to estimate poverty even if the consumption surveys are available.
The obsession with GDP growth estimates as the sole yardstick to evaluate the performance of the economy comes at the cost of ignoring all other estimates. The GDP growth estimates are only one of the various measures of evaluating the performance of the economy. There has always been problems with GDP estimation and they are only a rough estimate of how the economy has grown. But it says nothing about the distribution of income in the economy, leave alone welfare of citizens. On both fronts, available statistics suggest widening income inequality and worsening welfare of individuals—at least those at the bottom end of distribution. The fact that the current period of moderate growth has been accompanied by a decline in wages of casual workers raises many questions on the efficacy of GDP data to say anything on the level of living. While the situation may have worsened in the last four years, equally worrying is the outcome on health, education and nutrition, which has not seen similar improvements despite GDP growth crossing 9% per annum. It also says little about access to jobs, education and other basic services by a large section of the marginalized population.
The biggest casualty of the obsession with GDP growth estimates is the drowning out of other relevant indicators from public debate. This is true of agrarian distress, which has been a burning issue for decades now, or access to basic health and education, which only get superficial mention before elections. The issue is not whether GDP growth during UPA was better than the current growth, the issue is also about whether it contributed to raising the level of living and creating jobs for the population. On the latter, there is hardly any difference between governments in the last three decades.
Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi