Official GDP Back Series Throws Up Yet Another Set Of Growth Trends
The debate over economic growth in past years and under previous administrations continues, with the government now releasing official back-data for GDP growth as measured by the new series.
India’s statistical office shifted to a new GDP series, with a base year of 2011-12, in 2015. Since then, a niggling question has been whether data points under the old series and new series are comparable. And what the long-term growth trajectory of the Indian economy has been.
The official back-data for this new series was released in a joint press conference by the NITI Aayog and the government’s statistical office on Wednesday. The data is not comparable to a study conducted by the National Statistical Commission released in August. “The methodology used to back-cast the new series data now is different from the method used by the statistical commission,” said Rajiv Kumar, vice chairman of the NITI Aayog, while adding that the two are not comparable.
National Statistical Commission had used the production shift approach. GDP for 2011-12 was calculated using both bases. This showed a difference of Rs. 3 lakh crore, which was split across the period. This was an econometric exercise. This is methodologically not the right thing to do. It is taking the easy way out.Rajiv Kumar, Vice Chairman, NITI Aayog
Trends thrown up by the official back-data suggest that the old series under-estimated the impact of the global financial crisis on the Indian economy. It also over-estimated the rebound from the crisis.
- According to the new series, growth in 2008-09 plummeted to 3.1 percent compared to the old series estimate of 3.9 percent.
- In 2009-10, GDP growth was at 7.9 percent as per the new series as compared to the 8.5 percent estimated under the old series.
- In 2010-11, the new series shows growth at 8.5 percent compared to the estimate of 10.3 percent under the old series.
The official data released on Wednesday diverges from the draft release put out by the statistical commission in August. That release had suggested growth of 10.78 percent in 2010-11 - the highest seen since 1994-95. Speaking at the press conference, Kumar dismissed the methodology used by the statistical commission saying that it was not the “right way” to back-cast the data.
Change in methodology, use of latest survey results, use of new, more regular and reliable data sources and improvement in coverage are the major reasons for the differences between the old series and the new series.Pravin Srivastava, Chief Statistician
Directionally, the new series is similar to the old series which suggests policymakers were not mislead in assessing the direction of the economy, said Aditi Nayar, prinicipal economist at ICRA.
The new back series of GDP data highlight the volatility of Indian economic growth, with intermittent peaks in the pace of growth followed by dips. This suggests that sustaining a growth in excess of 8 percent over an extended period of time may pose a challenge, particularly in the absence of a secularly supportive global growth environment.Aditi Nayar, Prinicipal Economist, ICRA
Growth Under UPA vs NDA
The statistical commission’s study had led the United Progressive Alliance to claim that growth under its administration was higher than under the National Democratic Alliance’s rule. The government, soon after the release of that report, dismissed this saying the estimates presented in the statistical commission’s report are not the official estimates.
The latest, and now official, back-series tilts the political debate over growth back in favor of the NDA.
Going by this data release, the average growth rate during the the UPA-II regime between 2008-09 and 2012-13 was at 6 percent. The average growth rate in subsequent five years under the NDA stands at 7.12 percent.
The peak growth rate of over 10 percent under the UPA has also moderated to a more modest 8.5 percent. The highest growth rate under the NDA was marginally lower at 8.2 percent in 2015-16.
Barring FY 08, annual GDP year-on-year growth trend hasn’t changed. Even this data also shows deceleration in investment rate from 39.8 percent in FY 11 to 30.6 percent in FY 18 and decline in gross savings rate to 29.6 percent in FY 17 from 36.2 percent in FY 11. These are major economic challenges which Indian economy is currently facing.Devendra Kumar Pant, Chief Economist, India Ratings