The GDP numbers to be released later this month will include the impact of revised data series for industrial output and wholesale price inflation, TCA Anant, chief statistician of India, told BloombergQuint in an interview.
“New series of numbers will be incorporated to GDP compilation,” Anant said. The extent of the impact will be known only when the data is out by month-end, he said, refusing to make any guesses.
On Friday, the government revised the base year for calculating the Index of Industrial Production (IIP) and the Wholesale Price Index (WPI) from 2004-05 to 2011-12. The government revises base year periodically to make the indices a better measure of the economic activity.
“The revision in the WPI inflation rates would affect the GDP and GVA deflators, and may be a precursor to a revision in growth rates for recent years, particularly for those sectors for which nominal earnings or value addition data are deflated using the WPI,” said a report authored by rating agency ICRA’s economist Aditi Nayar.
This underscores the importance of regular updation of the base, and having a common base for all major macro-economic variables, to ensure that policymakers have access to timely and accurate information, while framing policies in a dynamic economic environment, the report added.
Pronab Sen, former Chief Statistician of India, told BloombergQuint over the phone that as far as the WPI is concerned, lower inflation will lead to a situation where the absolute measure of GDP will go up.
For non-corporates, Sen said it would be difficult to estimate the impact as they do not use headline IIP data.
On the reduced divergence between the new WPI series data and the Consumer Price Index, Anant said WPI has three elements: the item composition, weightage and third the exclusion of taxes. The exclusion of taxes in the new series will not skew the data, and the reduction in divergence cannot be directly related exclusion of taxes.
In the new series of WPI, prices used for compilation do not include indirect taxes in order to remove the impact of fiscal policy.
Calling the assessment of impact of Goods and Services Tax (GST) as “complicated”, Anant said WPI will be insulated from any changes that the new direct tax regime brings in.
CPI to an extent is being captured at the final point of sale, will of course include all taxes up to the final point of sale, therefore GST will also be included, but what is the impact is very hard to say because GST impact commodity by commodity is going to very complicated.TCA Anant, Chief Statistician
Impact of Demonetisation Post Base Year Revision
Anant, who is also the secretary in the Ministry of Statistics and Programme Implementation, refused to comment on revised data of pre- and post-demonetisation period.
He said the differences in series arise on account of a few parameters like the item basket and reporting entities.
“What the likely direction of the change is, what it implies, I will not want to guess. A general point I will make is that simple before and after comparisons of two points are too simplistic issues to answer (something) like (a) slowdown in industry. I would caution anyone against making such an assessment,” he said.