BackStates’ migration to new GDP system will take up to a year
Central Statistics Office to organize training programme for state governments next month
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New Delhi: After the central government changed the way it measures gross domestic product (GDP) growth with a new base year, the states are preparing to migrate to the new system—an exercise that will take up to one year. Starting the process, the Central Statistics Office (CSO) will organize a training programme for state governments next month.
“We have decided to call a meeting of state representatives to train them on the new series and help them recompile the old data. After that we will organize workshops to re-evaluate their data. The whole process will take around a year since the changes brought about are comprehensive," a CSO official said on condition of anonymity.
The CSO has released the new series of national accounts, revising the base year from 2004-05 to 2011-12.
Apart from a shift in the reference year for measuring real growth, conceptual changes recommended by international guidelines have been incorporated and new data sources included.
The data released under the new series, which paints a rather unexpectedly favourable picture of the Indian economy, has been met with scepticism, both from within and outside the government.
Under the 2011-12 base year, the Indian economy has been projected to grow at 7.4% at market prices in 2014-15 compared with a revised 6.9% in the previous year.
While there is consensus that the economy is on the mend, economists are questioning the extent of recovery being posited by the new measure of GDP. According to the CSO, the improvement is driven largely by efficiency gains due to higher value-added in manufacturing, which was not being captured by the old series.
The base year was changed in line with the recommendation of the National Statistical Commission, which had advised a revision of the base year for all economic indices every five years.
Goldman Sachs Group Inc.’s India unit, in a report released on Thursday, said the changes to measuring India’s GDP growth rates are in the right direction because they conform to international standards.
“The immediate implication is that GDP growth rates are likely to be higher in FY15 (ending March 2015) and FY16 than under the old series. That said, the sharp jumps in FY14 and FY15 growth rates do not tally with other activity indicators, including our current activity indicator. In part, this could be due to series such as IP (industrial production) not reflecting changes in the structure of the economy, especially technology," the report said.
The new 2011-12 series has also incorporated results of the recent national sample surveys such as enterprise survey (2010-11), employment-unemployment survey (2011-12), all India debt and investment survey, situation assessment survey of farmers and survey on land and livestock holdings (2013). It has also taken into account the population census (2011), agriculture census (2010-11) and livestock census (2012).
Under the new system, the traditional way of measuring economic growth-GDP at factor cost has been abandoned and replaced with GDP at market prices, which is the international practice.
Industry-wise growth comparisons will now be measured through gross value-added (GVA) at basic prices.
N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy said the real challenge will be to measure the GDP of states under the new methodology. “At present, ‘GDP at market price’ data is not available for states. It will be difficult to estimate such data for the previous years but will be useful for policy purposes if the government is able to give such data," he added.
Under the new system of national accounts, the coverage of manufacturing and services sectors has been made more comprehensive with the inclusion of annual accounts of companies filed with the corporate affairs ministry under their e-governance initiative MCA21. Coverage has also been improved for activities of local bodies-both rural and urban--and autonomous institutions, resulting in better coverage of government activities.
GVA at basic prices will add the net of production taxes and subsidies to GDP at factor cost. Stamp duties and property taxes are part of production taxes in India, while subsidies to labour, capital and investment such as apprentice subsidies and interest subsidies constitute production subsidies.
The statistics department will also release Consumer Price Index (CPI) for January with a new base year of 2012 next month. The GDP data revision will also incorporate the new CPI instead of the current practice of using CPI for various groups such as agricultural labourers and industrial workers. The new series of Index of Industrial Production and Wholesale Price Index are likely to be released by March 2016.
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