Mumbai: India’s new GDP (gross domestic product) series, introduced in 2015, might be over-estimating the size of manufacturing sector, argues a new Economic and Political Weekly (EPW) paper co-authored by Ravindra Dholakia, a member of the Reserve Bank of India’s monetary policy committee, and others.
The new GDP series, with 2011–12 as the base year, attributes a larger share of India’s GDP to the manufacturing sector than what had been previously estimated by the old series with 2004–05 as the base year.
However, this is most likely the result of flawed logic used by the new series to compute statistics, argue the authors in the EPW paper.
According to the central statistics office, the primary reason why the new series threw higher estimates of manufacturing sector’s size and growth, was the shift from the Annual Survey of Industries (ASI) to the corporate sector database. ASI data purportedly captures only the value-addition at the factory-level and fails to account for other activities such as sales, and research and development.
On the other hand, corporate results, used in the new GDP series, capture all such activity and hence provide better estimates, argued the statistics office.
However, Dholakia and others do not find the assertion that the ASI has been under-reporting the value added in manufacturing, convincing. Examining the ASI returns of certain corporate entities, such as Ambuja Cements Ltd and Reliance Industries Ltd, they show that the ASI data mostly captures the output of sales employees and of research and development (R&D) units.
The authors argue that the new series has more serious questions to answer about how it used data from the ministry of corporate affairs to arrive at estimates for the entire corporate sector.
Also read: Manufacturing Output in New GDP Series (bit.ly/2LMU2OZ), (bit.ly/2LMU2OZ)