New gross domestic product (GDP) numbers have not confused only the layman, but also experts. The latest one to express doubt over these numbers is R Nagaraj, a professor with the Indira Gandhi Institute of Development Research (IGIDR). His area of focus is the numbers in the non-financial private corporate sector (PCS) given in the GDP data.
His apprehensions, given in the latest issue of Economic & Political Weekly, are over the huge differences between the estimates by two reports of sub-committees of the Central Statistics Office (CSO), finalised in 2014 and 2015.
Nagaraj was a non-official member of the committee that finalised its report in 2014. The report is not in public domain.
The CSO’s sub-committee on PCS, including those in public-private-partnership, that finalized the report in 2014, recommended that the RBI sample data be replaced with the MCA-21 data, which is based on the corporate sector’s statutory filing of financial returns with the ministry of corporate affairs (MCA).
Now, the sub-committee’s final report in 2015, which is in the public domain, has reported figures that are quite at variance with the estimates reported in its 2014 version, says Nagaraj in the article, titled– Seeds of Doubt on New GDP Numbers: Private Corporate Sector Overestimated ?
For instance, take savings of PCS. For 2012-13, in the 2014 version of the sub-committee report, the PCS’ savings were lower than the corresponding National Statistics Accounts (NAS), 2014, that were based on RBI data, by 70 per cent. But, in the final 2015 version, PCS’ savings were higher than the corresponding estimate in NAS by 8.5 per cent.
The sub-committee, 2014 gave the estimates of Rs 2,09,467 crore (in nominal terms) as savings by PCS for 2012-13, while 2015 version raised it to Rs 7,48,047 crore. According to NAS, 2014, these stood at Rs 6,89,273 crore
In other words, between the two versions of the sub-committee report, PCS savings shot up by an incredible figure of 257 per cent, says Nagaraj , adding, “Can such a revision be deemed reliable without prior careful verification?”
Similarly, the 2014 version estimated investment by this sector at Rs 7,15,891 crore, the 2015 version at Rs 9,58,722 crore and NAS at Rs 8,46,382 crore. In other words, the 2014 version has lower estimates by 15.4 per cent compared to NAS and the 2015 report had higher figure by 13.3 per cent compared to NAS.
“In other words, the revision of estimates between the two versions boosted investment for the same year by 34 per cent,” wonders Nagaraj.
Also, the gross value added in manufacturing, which accounts for the bulk of PCS, has more than doubled — 108 per cent– in the 2015 version of the sub-committee report compared to the 2014 version. (See chart).
In comparison to NAS, 2014 estimates, MCA-21 figures swing from (-) 36 per cent in the 2014 version to 34 per cent in the 2015 version.
Nagaraj writes that both the versions of the sub-committee report are based on the same methodology, using roughly similar sample size– 5.24 lakh and 5.23 lakh companies in the 2014 and 2015 versions, respectively.
When asked whether there were any amendments made in the 2015 report in terms of methodology which could have led to such an overestimation compared to the 2014 report, Nagaraj told Business Standard, “Gleaning the two versions of the sub-committee report, I did not come across any amendments in the procedures. They seem to be based on the same methodology…”
In the article, he writes that quite possibly, the latter version of the report has corrected for probable errors in the earlier version. “But, how sure can one be about these numbers in the absence of credible verification?” he asks.
He says the onus is on the CSO to convince the data users of the correctness of their methods and procedures to arrive at the estimates.
When asked if some further corrections are made by CSO, will it not lead to more confusions, he said,” Yes, it could, in the short run. But credible estimates of national accounts based on defensible data and methodology would go a long way enhancing public’s trust in official statistics.”
He also wants release of the MCA-21 database in a suitable form to independent academic bodies for verification and validation.
When asked whether he is in touch with CSO to convince them to make the 2014 report public and on MCA-21 database, he said,”No, I am not”.
It should be noted that new GDP numbers had raised the economic growth of 2012-13 from 4.5 per cent to 5.1 per cent, of 2013-14 from 4.7 per cent to 6.9 per cent. Advance estimates pegged this growth at 7.4 per cent in 2014-15 and the Economic Survey projected the economy to grow by 8.1-8.5 per cent in 2015-16.
This will make India the fastest growing large economy in the World by 2015-16.
Earlier, chief economic adviser Arvind Subramanian had also advised caution against any hype in interpretations of the new GDP numbers.
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