GDP estimates were also revised upwards for 2016-17. mint
GDP estimates were also revised upwards for 2016-17. mint

The curious case of the new series of GDP growth estimates

  • While nobody had a quarrel with the revision in methodology, the real issue was the reliability and credibility of the underlying database
  • As has been the practice with this government, the standard response was to brazen it out or discredit the critics

Doubts have been raised on the new series of GDP estimates ever since they were released in 2015. The revision of GDP estimates is part of a regular exercise by the Central Statistics Office (CSO), undertaken every five years.

However, unlike the previous exercises, the revisions based on the 2011-12 series were not just technical adjusting for new data, but also used a different methodology consistent with international norms. This again is not new, as such revisions in methodology have happened in the past keeping in mind

Doubts have been raised on the new series of GDP estimates ever since they were released in 2015. The revision of GDP estimates is part of a regular exercise by the Central Statistics Office (CSO), undertaken every five years.

However, unlike the previous exercises, the revisions based on the 2011-12 series were not just technical adjusting for new data, but also used a different methodology consistent with international norms. This again is not new, as such revisions in methodology have happened in the past keeping in mind changes in international data collection standards.

However, none of the earlier revisions generated the same kind of controversy as the 2015 revisions. The issue was not just due to the sharp upward revision of GDP estimates, which was found to contradict some of the estimates of economic activity from other independent sources, but also the underlying methodological changes and the use of new unreliable and untested database, which was not open to scrutiny by independent researchers. These discrepancies were pointed out not just by independent academics and the government’s own institutions such as the finance ministry and the Reserve Bank of India, but also by international multilateral institutions such as the International Monetary Fund.

These doubts have only been strengthened after frequent revisions of the GDP estimates, sometimes sharply, as was the case with upward revision of the GDP growth rate of the controversial 2016-17 demonetization year. As has been the practice with this government, the standard response was to brazen it out or discredit the critics.

While nobody had a quarrel with the revision in methodology, the real issue was the reliability and credibility of the underlying database. In this case, CSO preferred to use the MCA-21 database of the ministry of corporate affairs, which was not only incomplete, but also untested and unreliable. The use of the MCA database covered a large part of the organized sector estimates, but it was also used for extrapolating the estimates of the unorganized sector, for which no independent estimates are available on an annual or quarterly basis. Although no private researchers had access to the MCA database, members of the committee to suggest the base revision of GDP estimates had already pointed out the inadequacy of the database.

However, the recent technical report of the National Sample Survey Office (NSSO) on service sector enterprises in India has confirmed what was already known informally.

The technical report, which used the MCA database along with the Economic Census (EC) and Business Registry (BR) to sample enterprises in the services sector, says 45% of the units from the MCA database were found to be out-of-survey/casualty, against only 18% in the case of EC and BR. Of the 39% out-of-survey units of the MCA database, 21% were out of coverage and 12% non-existent.

As has been reported by NSSO, the sample was already cleaned up and it included only those units for which complete address and details were available and met the criteria specified by CSO. Further, the report raises serious doubts on the coverage of the MCA database. It also does an external corroboration with external databases, such as the current Goods and Services Tax Network database/previous service tax database, and found the coverage to be low.

The technical report is not just a scathing indictment of the MCA database, but also raises serious questions about the functioning and independence of the statistical system. It has already come under strain after the NITI Aayog interfered in the release of the employment and unemployment surveys of NSSO. While these are obvious in case of politically volatile issues such as farmers’ distress, unemployment and growth estimates, even regular publications such as crime records and regular administrative data from ministries have been found to be compromised.

The real casualty is not the statistical system alone, which is in dire need of reform to restore the credibility of the system built meticulously over the years, but also the foundations of our democracy, which is based on holding the ruling dispensation accountable, based on credible data.

*Himanshu is an associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi. He is a columnist with Mint.

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