Some Points to Know about the GDP back Series Data by NITI Aayog

Some Points to Know about the GDP back Series Data by NITI Aayog

The government on Nov 28 released the GDP growth estimates for previous years based on their new method of calculation and base year it had been adopted in 2015. This new data and the manner in which it was released have led to many criticisms from various quarters, including Opposition political parties and economists.

What has happened?

In 2015, the UPA government adopted a new method for calculating the gross domestic product of the country, and also adopted the Gross Value Added measure for the better estimate economic activity. Further, these changes involved a bringing forward of the base year used for calculations to 2011-12 from the previous 2004-05. However, this had led to many problems of not being able to compare recent data with the years preceding 2011-12. The GDP back series data released on Nov 28 provided the earlier years’ data with using the new calculations.

What does the new data showing about?

The new data released showing the GDP growth during the UPA years averaged 6.7% during both UPA-I and UPA-II, comparing with the 8.1% and 7.46%, respectively, estimated using of older method. In comparison, the current NDA government has witnessed an average GDP growth rate of 7.35% during the first four years of the term, based on their new method.

The new data directly shows that, the contrary to the earlier perception, the Indian economy has never graduated to a ‘high growth’ phase of more than a 9% in the last decade or so. Our Former Chief Statistician of India TCA Anant also pointed out that the newer data, for the mining and manufacturing sectors has shows that India did not recover from the global financial crisis as quickly as it initially thought.

What were the major changes made?

The first and most basic changes are being made is the data calculations was changing by the base year. While using 2011-12 as the base year is simpler for calculations for subsequent years, it was a tougher exercise for calculating backwards using the new base.

According to the Ministry of Statistics, the method for preparing the back series data is largely the same as what is used to calculate the data using the new base, which are how all our national accounts calculations will be made going forward.

While doing this exercise, the government has also included measuring the GVA, Net Value Added (NVA), and the use of new data sources wherever available. One of these data sources is the Ministry of Corporate Affairs MCA-21 database, which became available since 2011-12.

For most of the sectors, simply changing the price of vectors from a 2004-05 to a 2011-12 base was enough, but others things required is a splicing of new and old data in the relevant proportions to arrive at the closest approximation.

The new method is also statistically and more robust and is tries to relate the estimates to more indicators such as consumption, employment, and the performance of enterprises, also incorporates factors that are more responsive to current changes, unlike the old data series that usually took 2-3 years to register an underlying change.

What are the problems with the new GDP data?

As even the government concedes, there are a many number of ways to calculate the GDP back series data. To arrive at the ‘best’ one out, it held numerous consultations with leading economists and statisticians and even delaying of data release once had to address all its questions the experts posed.

However, the whole number of options available as well as the manner in which the data was released also led to many criticism and doubt over the method that was finally chosen to calculate. The fact that the data was released by Niti Aayog led to questions over the credibility of their method chosen.

Are these numbers different from previous estimates of the data?

The new back arrangement information separates forcefully essentially from the appraisals made in a draft report discharged by the National Statistical Commission not long ago, which demonstrated that development amid the UPA years crossed 9% on no less than four events, and even hit 10.78% in 2010-11. This report pegged the normal GDP development amid UPA-I at about 8.4% and UPA-II at 7.7%. The legislature, notwithstanding, rushed to clear up this was only a draft report that utilized just a single of the numerous strategies on offer to evaluate the back arrangement, and that it was not the last number.