Why in news?
- The report on back series GDP data by an expert committee set up by National Statistical Commission (NSC) was released recently.
- It has led to debates on the validity of the figures, and the MoSPI has termed the estimates 'unofficial'.
What is the report on?
- Back series calculations are done to link a new series of national accounts with an old series.
- This gives a better comparison of growth over the years.
- The NSC had constituted a Committee on Real Sector Statistics under the Chairmanship of Sudipto Mundle in 2017.
- The objective was improvement and modernisation of the real sector database.
- The committee has worked out a back series for economic growth from 1994-95.
What is the complication?
- The report compared growth rates between old series (2004-05) and new series based on 2011-12 prices.
- E.g. As per the old series (2004-05), the expansion in the GDP at constant prices was 9.57% during 2006-07.
- As per the new series (2011-12), the growth number stands revised at 10.08%.
- The committee has thus adjusted the GDP figures from 2005-06 to 2014-15.
- This was based on the new base period adopted in 2015 (from 2004-05 to 2011-12).
- Notably, the series was for the new form of calculation of gross domestic product (GDP) and gross value added (GVA).
- GVA gives a picture of the state of economic activity from the producers’ side or supply side.
- On the other hand, GDP gives the picture from the consumers’ side or demand perspective.
- The back series calculation has been complicated because of the change in methodology.
- As, some of the data used under the new methodology is not available for earlier years.
- These recommendations of the NSC Committee will be examined by MoSPI and other experts.
- The appropriate methodology to be adopted for generating the back series estimates will then be decided.
- The data would be released officially later by the MoSPI.
What are the highlights?
- The GDP growth, calculated at market prices, touched double digits twice - in 2007-08 and in 2010-11.
- The overall trend follows a spurt in growth during the boom of the mid-2000s.
- It is followed by a sharp deceleration in 2008-09, the year of the global financial crisis.
- GDP growth at factor cost went down from 9.3% in 2007-08 to 6.7% in the crisis year.
- However, there was a quick recovery, with unprecedented increase in public spending and subsidies in that year.
- The stimulus helped the economy reach boom-level heights in the first years of the second UPA government.
- But a combination of over-extension, high oil prices and administrative paralysis following the anti-corruption movement caused a swift fall.
- The country went down to 5.4% growth in 2012-13 but recovery then began in 2013-14.
- It was benefitted from the current government’s cautious approach to macroeconomic stability.
- Also, rapidly improving global growth and a sharp fall in oil prices helped.
What does it imply?
- The broad structural trends in the Indian economy have not been changed by these figures.
- The average growth rate under the current NDA does not reach the levels achieved under either the first or second terms of the UPA.
- The back series reveals again that much of the expansion in the 2000s was driven by government action.
- This is the period when GDP growth is higher than GVA growth.
- (Both measures need not match because of the difference in treatment of net taxes)
- This means that subsidies are increasing more than indirect taxes.
- Worryingly, there was no major upward momentum since the broad recovery that began in 2012-13.
- This is despite the fact that global growth has largely recovered, in the past few quarters in particular.
How does the future look?
- The macroeconomic stability must be examined more closely as recent gains are now at risk.
- At $18 billion, the trade deficit was at a 62-month high in July, 2018.
- It is argued that the full-year current account deficit will be at least 2.8% of GDP.
- This is riskier given the fact that global capital is turning unfavourable for emerging markets.
- The government will thus have to examine ways to reach the heights of GDP growth scaled by its predecessor.
- This should, however, be done without further destabilisation of the macro-economy.
Source: Business Standard, Firtspost
