Wrong GDP calculation embarrasses government

Wrong GDP calculation embarrasses government

New Delhi: Facing embarrassment after throwing forward sharply different economic growth figures based on two different methodologies, the government will soon set the record straight on the pace of economic expansion.

According to the government data, the economy grew by 8.8% in the April-June quarter based on actual expansion without accounting for taxes—a methodology known as factor cost.

At the same time, the data released by the ministry of statistics and programme implementation (Mospi) showed growth at market price, which reflects the value of the production or services that includes indirect taxes, at just 3.65%.

“There were some problems in calculating GDP at market prices at constant prices, and we will come out with a corrigendum soon," said an official with ministry of statistics and programme implementation.

The Central Statistical Organisation (CSO) that releases the data is part of Mospi.

The wide difference in GDP growth numbers under the two methodologies created confusion among economists.

Experts said GDP at market price should not have been so low, since indirect taxes—excise duty—rose by 2% this fiscal, after the government partially withdrew stimulus measures.

The mistake was in calculating a price deflator, which is used for converting nominal GDP into real GDP, explained the official.

Real GDP does not include inflation and hence considered a better indicator of an economy. Also, when economic growth rate is defined, real GDP is used, rather than nominal GDP.