The numbers game (The debate over CSO back series GDP data)

Excellent study material for all civil services aspirants - begin learning - Kar ke dikhayenge!

The numbers game (The debate over CSO back series GDP data)

---

Read more on - Polity | Economy | Schemes | S&T | Environment

---

• A direct comparison: The new back series GDP data by CSO suddenly projects the present govt.'s GDP growth performance as better than that of the UPA era.
• The 2015 CSO computations: When the CSO did that in 2015, the growth rates for UPA era came out higher. NITI had rejected those, and blocked the release. Why should the CSO yield to NITI on a purely technical issue?
• The Nov. 2018 recomputations: So CSO (under NITI Aayog's guidance!) came out with the new number (of GDP back series data) in November 2018. Fastest growth is seen in 2010-11 at just 8.5% compared to 10.3% earlier. The best year for Modi govt. is seen as 2015-16 when it was 8.2%.
• Many technical questions, no answers: Many statisticians are asking questions to which there are no answers. Even PM EAC Chairman Bibek Debroy has said he isn't happy with use of "less than perfet" deflators by CSO.
• International guidelines: The govt. says that revisions are compliant with global guidelines, the SNA (System of National Accounts), 2008. But many of the proxies used by CSO are not recommended by the SNA!
• Structural break in back series in 2011-12: The CSO has introduced this break, strangely. To understand – 

1. Macro aggregates like GDP and GVA are calculated each year, with reference to a "base year” 
2. Base years are periodically updated, and entire GDP number till 1950-51 are re-calculated 
3. Last base year revision was in 2015, when the 2004-05 base year was updated to 2011-12 
4. In this, non-availability of some databases created trouble 
5. In 2015, when GDP series was rebased, MCA-21 database of balance sheets was used for forward calculations (2016, 2017..). That raised GDP numbers from 2011-12 a lot. But these databases are not available prior to 2011-12. So how to resolve that? 
6. CSO used a proxy, but rates went up in earlier years, something NITI rejected. It withheld the back series! 
7. Stalemate continued for 3 years! 
8. Finally, CSO used a proxy data from Annual Survey of Industries (ASI), something used for earlier 2004-05 base series also. 
9. You cannot really combine MCA-21 and ASI databases, as they are not of same structure and not seamless.

• Complications: ASI has a smaller coverage. For a company that has mfg. units pan-India, it may also have non-mfg. units. Total corporate GVA ideally is sum of mfg. and non-mfg. units of that company. MCA covered both, but ASI covered only manufacturing (not non-mfg.) That GVA never got covered as even the Services Sector surveys leave that out (non-mfg. inside a mfg. company).
• Escaping estimation: Hence, in years before 2011-12, some GVA has escaped getting added due to these holes in ASI coverage, making 2011-12 the great point of discontinuity.
• Upwards and Downwards: Due to this structural break, we see an upward surge post 2011-12, and a downward surge prior to 2011-12.
• CSO's challenge: How to get the non-mfg. GVA that ASI ignored? This problem has no clear solution. Some services businesses can help, some can drag or kill. In Vijay Mallya's case, the Airlines business (services) killed the mfg. business (breweries). The CSO never admitted these issues.
• TCA Anant had refused: When he was the CSI, he had refused to use ASI in place of MCA in back casting exercise. As soon as he retired, the government had its way, and a shining new series came up, casting UPA-era governments in poor light!
• Summary : There are structural faults in the new GDP back series data, casting a big question mark over the entire authenticity of the exercise itself.

Read more on - Polity | Economy | Schemes | S&T | Environment

Join UPSC Self Prep course | Online Course (PT Gurukul)  | Covid Special Course | Join PT courses

* Content sourced from free internet sources (publications, PIB site, international sites, etc.). Take your own subscriptions. Copyrights acknowledged.