Shishir Asthana
The Ministry of Statistics and Programme Implementation (MoSPI) set the cat among the pigeons with the release of back-series GDP data. It has set off a political battle as the government and opposition Indian National Congress squabble over who is the better economic manager of the country. But a more nuanced look shows that both parties had their shares of successes and failures. In any case, there is no significant difference between the old and new series. So, in the end, the bickering is much ado about nothing,
The Congress fired off a tweet claiming how its united progressive alliance (UPA) government delivered the only instance of double-digit annual growth in modern Indian history.
There is nothing wrong in what the Congress has said as the data released by the government agency clearly shows. The government immediately went on damage control with various ministries criticising the report and saying the estimates are not official and meant only to facilitate a decision on the appropriate approach.
The only thing that the data exemplifies, once again, is that the government of the day is extremely touchy over criticism. A comment by ex-finance minister P Chidambaram of Congress vindicating UPA’s performance was met with a long blog by a recuperating Finance Minister, Arun Jaitley.
Jaitley said global factors were responsible in the pre-2008 era, and after the global financial meltdown the UPA government compromised fiscal discipline and advised the banking system to go in for reckless lending, notwithstanding the fact that it would eventually put the banks at a risk.
Jaitley too is right. UPA-I, whose term coincided with the boom years in global growth and culminated in the great recession saw an average annual growth of 8.34 percent. This fell to 7.67 percent in its second term and is only marginally better than the 7.34 percent delivered by the NDA government so far in its term.
Sure, the two double-digit growth numbers in the history of India has been during Congress rule. The Congress’s average growth rate is also better from the turn of the century. But that has been the case even with the old data series. According to the old series, economic growth in 2007-08 was 9.8 percent and in 2010-11, 10.26 percent. However, the last three years of the UPA rule saw growth fall to an average 6.27 percent per year. The fiscal deficit and inflation ballooned during this period while policy paralysis induced a decline in investment demand.
The fact that it all boils down to political posturing can be seen from the fact the Congress is claiming credit now and managed to hide it had vehemently opposed the revised GDP numbers when it was introduced in 2015.
In the mudslinging, the story that the data points throw has been lost. Let’s go back a bit to understand the need for new data and what they say and do not say.
The new series of National Accounts Statistics (NAS) with the base year 2011-12 was revised and released on 29th January 2015. Whenever a new series is introduced there has to be some sort of continuity with the old data series.
The problem the government’s statistical office faced when trying to connect the two data series was a simple one – there was no data. The MoSPI report clearly says while it could work with government data, it had to rely on CMIE (a private sector database provider) for private sector data for historical data. The very fact that the government has no credible database of private sector companies is appalling.
Over the last two decades, the contribution of the private sector has increased considerably with new sectors being born and many old ones fading away.
MoSPI has taken these changes into account and used statistical methods rather than actual data in computing the back series. This difference shows up as the ‘discrepancy’ variable in the data compiled by MoSPI. The statistical discrepancy is equal to gross domestic product less gross domestic income. These two measures are, in principle, the same. The difference reflects the less-than-perfect source data.
It is this discrepancy that has helped in showing a higher than earlier reported growth numbers during the UPA era. The MoSPI report acknowledges that when we look at the growth rates, there are some differences, although not significant and this is largely due to the ‘discrepancy’ variable, which is found to be highly volatile. Even then, the fact remains that the two series have moved in tandem with less than 50 basis points average difference between the two.
The National Statistical Commission has said that the work on the back series is “work in progress.” In the meanwhile, politicians should take a chill pill and debate on issues that actually matter to the economy.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
