Today, world’s economy is growing at a fast pace. A change in the methodology to calculate gross domestic product is partly why India’s data is puzzling and encouraging economists to find a workaround. In 2015 and 2018, India's economy became the world's fastest growing economy.
India topped the World Bank's growth outlook for the first time in fiscal year 2015–16, during which the economy grew 7.6%.India’s new GDP series was introduced in 2015 with data available since 2012. One of the India’s economist with Bloomberg Economics in Mumbai, Abhishek Gupta, stated that India’s GDP series depends mostly on nominal indicators in two key areas relative to the old series. The lack of appropriate price indexes to deflate these nominal indicators now results in a greater separation of the new series from high frequency volume-based economic indicators, he mentioned. He further stated that “This is more pronounced during periods of difference between retail and wholesale price indexes. That’s because it tends to generate a more faulty measure of the GDP deflator due to its over-reliance on the WPI index.” In 2015, India had changed the method of measuring size of the economy, like, the base year was shifted to 2011-12 from 2004-05 among other revisions. The motive behind this was to capture latest developments including the replacement of obsolete items such as typewriters that have made way for smart devices. The economy had been expanding on a high pace. Only one of 44 economists surveyed by Bloomberg, could predict the economy’s fastest expansion in more than two years in the June quarter. The numbers have been way off estimates on at least three other occasions in as many years, and with data for the fiscal year second-quarter due November 30. A member of the Reserve Bank of India’s rate-setting panel believed the statistics office is overestimating manufacturing output by replacing the Annual Survey of Industries with corporate financial data in the new series. Pronab Sen, Country Director for the India Programme of the International Growth Centre, stated that old series was easier to forecast for people outside government because it was based essentially on an index of industrial production and first estimates of agriculture. In new series, government has added quarterly results of listed companies and sales tax data, which isn’t available in the public domain. However, a good GDP series is important for predicting future and also back casting. Nevertheless, the economy, needs to restore the credibility of its data and help economists predict the economy more accurately.
By: Anuja Arora