CSO may have erred on Q1 GDP by nearly 1%: JP Morgan report

The Central Statistics Office (CSO) may have erred in its calculation of the June quarter gross domestic product (GDP) growth number, feels brokerage house JP Morgan. According to the JP Morgan report, CSO could have inadvertently reduced the growth number by nearly one percentage point.GDP is the sum of gross value added (GVA) and net indirect taxes (indirect taxes less the subsidies). While calculating the GDP, current year’s number are considered and then converted to base year numbers - 2011.CNBC-TV18's Latha Venkatesh explains that in the last quarter of 2015, the GDP was higher than GVA by 1.4 percent. However, in the April-June period, GDP was 0.1 percent lower than the GAV. The huge gap between two periods reflect the miscalculation on part of the CSO. The report mentions that difference between the two quarters is due to higher number used to deflate the net indirect tax, an important component while calculating the GDP. The main question raised by the report is over deflation of indirect taxes in first quarter of this year. In Q4 of FY2015, indirect tax was deflated at 2.6 percent. On the other hand, it was deflated 31.4 percent in the April-June quarter. This resulted in a much lower GDP at 7.1 percent instead of 8 percent (approximately) if the indirect taxes were not deflated so much. Deflator for net indirect tax was 2.6 percent in the January to March period this year as against 31.4 percent in the April-June period. Watch video for more.