Is the new GDP data reliable?

Excerpts from Your World at 10 on CNBC-TV18 Watch the full show » RELATED NEWS Govt revises demand data June quarter GDP Q1 GDP at market price revised to 10.02% from 3.7% Anomaly in Q1 GDP: What led to the confusion? June qtr GDP growth data to be unchanged: Govt

The gross domestic product (GDP) is the biggest ever number put out by a country's statistical department. The first quarter GDP data that came out threw up two main confusions. There was a wide gap between the supply side number which came in at 8.8%and the demand side number that came in at 3.7%.

Later on, the Central Statistical Organisation (CSO) tripled its initial estimated growth on the demand side from 3.7% to 10%. That's more than a 6% jump. What does that say about our growth and the wholesomeness of it and our data reliability?

CNBC-TV18's Banking and Commodities Editor Latha Venkatesh quizzed Govinda Rao, Director, National Institute of Public Finance and Policy (NIPFP) about the quality of Indian statistics.

Below is a verbatim transcript. Also watch the accompanying videos.

Q: This new GDP at market prices coming in at 10.2%, the corrected data. Do you think it's reliable, you will go with it?

A: Some questions on the reliability will always arise, but I have always felt that it's not something new. This is something which we have got to live with. Part of the problem is in a large country like this you will always have to do various surveys and from time to time incorporate those results into the statistical base.

What we do is to look at these numbers and then get as broad orders as magnitude and get some broad trends rather than trying to go to your second-third decimal and to infer things. I do not think the credibility of the system has been tarnished or anything of that sort.

Q: Is it not a little surprising, even shocking, that data like this does not go through several filters? That a wrong deflator went undetected in our system and this not any micro-minor data. This is the most important headline data - GDP. It cannot get bigger than that. Don't the lack of filters or checks and counterchecks surprise you?

A: They need to put the checks and counterchecks in place and there is no excuse for that. This habit of somebody preparing and the higher-ups routinely approving it, it should not be the case. Somebody has to go into these details. They have to find accountability to this particular issue and there is no question on that. I hope they will.

There is also a much greater need for coordinating the work of the Ministry of Statistics. In fact you have the Ministry of Statistics and you have the CSO. There has to be a proper coordinating system. I do not know whether they really link up very well, whether there is a proper coordination. I think there is something that needs to be done. The Chief Statistician should have the final responsibility for putting out these numbers.

Q: We are looking at two-three organisations over here. We have the Ministry of Statistics and Programme Implementation whose secretary is the Chief Statistician. He is usually on deputation from some university or the other. Under him is the CSO, which appears to work like an independent body and the Chief Statistician is not involved in the day to day work of the CSO. Separately you have a Standing Committee, the National Statistical Commission which is suppose to on a regular basis advice on the quality and improvement of data. All this seems to be working in a rather disparate fashion. Aside from that, as an economist and as a person who handles data at a very granular level, where are the vulnerabilities of this data? Is Index of Industrial Production (IIP) vulnerable? Are the indexes like Wholesale Price Index (WPI) and IIP or more universal data like GDP more vulnerable? Where are the chinks in the armour?

A: All this data are vulnerable. In fact there are shortcomings in all the data. IIP is possibly the worst. They have not updated the basket for a long time and whenever there is a high increase in IIP, you say the IIP has increased and whenever there is a deceleration you say that the basket is bad. You can't be doing that, you need to clean it up.

As far as GDP data is concerned, we should see that the GDP origin from agriculture industry and services from the production side seems to be in place, to a large extent. Obviously, there is room for improvement because India has a large organised sector and getting GDP from the unorganised sector is not an easy job to do. You need to have some service from time to time and then update the benchmark numbers. There is something which we can accept.

On the consumption side, again there is a problem, the type of problem that we encountered in the recent fiasco. That is one of the reasons why one tends to go by the numbers from the production side because they have some systems in place for getting numbers from agriculture, numbers from the manufacturing sector and various services because a lot of benchmark services have to be done from time to time, of course we do not have any other alternative. But at the end of the day whatever is the quality we have got to take.