Even 24% GDP Fall May Underestimate Covid Hit, Says Former Chief Statistician
The near-24% contraction in India's gross domestic product may underestimate the impact of the Covid-19 pandemic because the data does not cover the extent of the contraction across various segments of the economy, according to Pronab Sen, the nation's former chief statistician.
"The problem is that we will not get hard data on a quarterly basis. The revisions, which will be annual estimates, will have to be factored in,” Sen, who headed the country’s statistics department from 2007 to 2010, said in an interview with BloombergQuint.
Sen explained that the quarterly estimates are based on corporate data, and that too mainly for listed companies, and not the smallest firms. “Once the Ministry of Corporate Affairs data comes in, and if, as we all suspect, the smaller companies have done worse than the larger companies, we should expect one round of revision on that count.”
There would be a second round of revision to the first quarter GDP data, which could be larger, when the informal sector data comes in, though it would take a while to happen, he said.
India’s GDP declined 23.9% over a year earlier, the steepest contraction on record, during the April-June quarter, according to data released by the Ministry of Statistics and Programme Implementation on Monday. The nationwide lockdown, imposed from late March till the end of May in the wake of the Covid-19 outbreak led to a significant slump in aggregate demand alongside a near halt in the supply of all non-essential goods and services. From June onward, the central government along with states have been gradually opening up parts of the economy.
Sen said he found the GDP contraction in public administration and defence, of 10.3% in gross value added terms, a negative surprise.
“At a time when the only really active player was the government, one would have expected this to be a small positive, not a negative," he said. "I find this a really bad news because what it means is that the government has scaled down.”
He said it is puzzling that the government final consumption expenditure is up by quite a lot, while public administration and defence and others are moving in opposite directions
The takeaway is that if we are looking at a GDP fall of 24% in the first quarter, unless something miraculous happens over the next three quarters, we are not talking about a negative 5% GDP growth but a negative growth which is significantly higher than that.Pronab Sen, Former Chief Statistician Of India