Like most government statistics, doubts have been raised on the growth rates of gross domestic product (GDP) from the Central Statistics Office (CSO) following the new series of GDP estimates released by the National Democratic Alliance (NDA) in 2015. So far, the government’s response has been an outright denial of any problem with the new methodology of GDP estimation. In the absence of raw data, it is hard for private researchers to raise questions on the credibility of official statistics. The recently released report of the National Sample Survey Office (NSSO) on unorganized enterprises has confirmed the doubts on suitability of MCA-21 data for estimating GDP. MCA-21 is a key database that forms the basis of GDP estimation in the new series. But as the NSSO report showed, there are a number of non-existent entities, along with misclassified enterprises, which raise suspicions on their reliability.

But even before the NSSO report was released, doubts were raised on the new series of GDP estimates, which often showed trends at variance with other independent sources of data. Doubts over some of the data on consumption, production and deflators have been raised by independent researchers for some time now. These doubts have now been confirmed with the publication of a research paper by the former chief economic adviser (CEA) to the finance ministry Arvind Subramanian, who has used long-term time series data on several indicators not only for India but also for other countries. By his estimate, India’s GDP growth rates are overestimated by a whopping 2.5 percentage points in the new series after 2011-12.

To be fair, he did raise doubts on the credibility of the new series in economic surveys, and point it out as a puzzle. Nonetheless, critics may have a point, as far as the timing of the report goes, and over his silence on some of these during the crucial period when the economy was going through a severe crisis. The implications of the growth overestimation are not just an academic matter. The data is a crucial input to a better understanding of the health of the economy and the consequent policy response to it. Perhaps a realization of the slowdown of the economy would have led him to advise a different course of action as the CEA of the government.

In any case, the question is not just limited to the use of GDP data and the inference drawn from it on the health of the economy. GDP data is only one among many databases that are good and strong proxies for the health of the economy. The fact that demonetization led to some deceleration in the overall economy, driven by the informal sector, does not require any proof from the national accounts. Similarly, the fact that the economy has been going through a period of jobless growth with lack of jobs being an important issue does not require any data on growth rates. So is the case of the worst phase of the agrarian crisis, which was out with thousands of farmers marching on the street. The fact that all of these were a result of severe demand deflation, particularly in the rural economy, did not require time series data on GDP. Most of these were being argued by independent researchers using the same 17 data series that Subramanian has used to show overestimation of growth rate from the GDP series. It is not the complicity of Subramanian on the GDP estimates despite overwhelming evidence which is worrying, but his inability to see the crisis in the economy that was all over the media. The long-run impact of the first one is only a part of the larger issue of a better understanding of what ails the Indian economy. The recent data on national accounts released last week has only confirmed what has been known for some time: that the crisis of low demand is far from over.

The problem of estimating GDP growth rates is not just a technical issue. While a new committee may be set up to examine these issues and may suggest a different measure, to assume that it is some kind of technical deviation is naïve. The GDP data is part of a long list of important statistical variables that have been interfered with by the political establishment.

This was very much evident in the case of employment statistics. The employment data has finally been released, but not without attacks from the highest government officials on the credibility of the data itself. The fact that the committee tasked to review the report has allowed the report to be released without any changes is testament to the strength of the statistical system, and also confirms the role of the government in fiddling with important statistical data. The same is true of the GDP data. Otherwise, what explains the undue interference of the NITI Aayog in recalculation and publication of the back series of GDP estimates when the official series was published by the National Statistical Commission?

The challenge for the statistical system is not just to produce credible and robust national accounts estimates, but also to insulate itself from the political system. Given the recent evidence of political interference in crucial statistical indicators of the Indian economy, it is easier to correct the discrepancies in the statistical data than to restore the credibility of the statistical system.

Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi

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