The central statistical office (CSO) has come out with a new series of national accounts with 2011-12 as base year for computing economic growth rate.
The central statistics office (CSO) has come out with a new series of national accounts with 2011-12 as base year for computing economic growth rate. This will increase the size of economy which in turn will help in lowering of fiscal deficit, computed as a proportion of the Gross Domestic Product (GDP).
Post the revision, FY14 GDP growth stands at 6.9 percent (from 4.7 percent) and FY13 at 5.1 percent.
This changes are done once in five years to keep pace with the changes in the economy. From now on, CSO will measure growth by gross value-added at basic prices, instead of by GDP at factor cost.
The government has projected fiscal deficit target of stands at 4.1 percent of GDP for the current financial year.
Soumya Kanti Ghosh, Chief Economic Advisor, SBI, feels there would be a material difference in numbers because a new methodology has been adopted. “They have covered more sectors, more amount of financial intermediation, revision of labour activities, then also looked into the organized sector and the unorganized sector activity so the problem of this ASI data coming two years later, and therefore inserting the GDP data, the numbers at first instance will look much better because the size of the economy as been an issue,” he said.
Former CSO Pronob Sen said the new numbers are as per market prices. “Basically it means that in 2013-14 for various reasons, the subsidy element had probably dropped quite sharply and since the subsidy is deducted, lowering of the subsidy pushes up the figure. So it’s basically getting the data on the subsidy.”
According to Sen, it’s not just a scientific calculation. “What has happened when we moved to the new base year is we’ve actually got better data. Basically if you look for instance in the corporate sector, we were earlier going with the RBI forecast and which were based on 2500 corporates. This time around we are using the MCA21data base which is five lakh companies as compared to 2500. So the quality of data has improved,” he added.
Gaurav Kapur of Royal Bank of Scotland, feels with the new numbers at market prices and with a much richer corporate data one is getting a better estimate of the overall GDP – which is the goal at the end of the day for any exercise, when one looks at statistics.
“As it is a change in the base year would have mean slightly higher GDP growth because of the change in prices. However, the fact that you are capturing more data and especially in an economy the size of India it is crucial that we capture scientifically as much as possible and an accurately as possible I would say it is a good first start,” he added.
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