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New GDP Data Proves Neither NDA nor UPA Pushed India Towards its True Growth Potential

The government has lowered economic growth rate during the UPA regime by releasing the back-series GDP data, where it shaved off over one percentage point from the only year when India posted double-digit GDP growth post-liberalisation and from each of the three years with 9-plus percent expansion.

Sindhu Bhattacharya |

Updated:November 29, 2018, 1:52 PM IST
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New GDP Data Proves Neither NDA nor UPA Pushed India Towards its True Growth Potential
An employee works inside a garment factory. (Representative image from Reuters)
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New Delhi: As politics over the latest back-series GDP data released by the government reaches a fever pitch, it is hard to ignore the fact that politicians shift positions when faced with hard numbers. Numbers usually do not lie but inference and explanations thereof can be tweaked to play politics, especially in matters of economics. So the Congress had thumped its chest earlier when a government panel had done some calculations to show that growth during the UPA regime crossed the 10% mark in one year and was higher than anticipated in other years. But since Wednesday, when the new data set has been released with far lower growth rates, the same party has been crying foul.

The government has lowered economic growth rate during the UPA regime by releasing the back-series GDP data, where it shaved off over one percentage point from the only year when India posted double-digit GDP growth post-liberalisation and from each of the three years with 9-plus percent expansion.

This is quite the opposite of the findings of the earlier panel, which through its calculations showed higher economic growth during the UPA tenure. So is the Modi government deliberately playing with data to dress up the GDP during its four-year term? How can two sets of numbers give almost opposite sets of conclusions? Is this being done now since the country is just months away from General Elections and the narrative of better growth during Modi years would suit the ruling dispensation while it would hurt the Congress’ chances of a comeback?

There is little evidence for saying so even though some questions remain. For example, the timing of the release of the back series helps the ruling party. The numbers could have been released much earlier and even now, experts say that the back series should go back further to the early 90s for a better assessment of economic growth. Then, one can question the involvement of the Niti Ayog in the back series calculation, since such number crunching has historically been the exclusive domain of the Central Statistical Organisation (CSO). In fact, the involvement of the Niti Ayog may have needlessly politicised the entire issue. And anyway, the wide divergence between the earlier findings and the current interpretation itself seems a little suspicious.

But to question the methodology used to arrive at the numbers would require domain experts from the Congress to come up with more credible objections. It is routine for economists to differ over calculation methods and interpretation of numbers so this task won’t be easy. And till now, all one has heard is opposition rhetoric, no explanation has been forthcoming on why what the government numbers show may not be correct.

In this tweet, Niti Ayog vice-hairman Rajiv Kumar has accepted the challenge of congress leader P Chidambaram about a debate on the GDP back series. Since Wednesday evening, the Congress has been venting its anger at the numbers, with senior leaders questioning the data, its timing and its implications.

If one were to keep the political implications aside, the back-series data show that India has not been reaching its true growth potential and despite the significant economic reforms, we did not cross the 9% growth mark in any single year during the UPA or the NDA regime. And that the global financial crisis of 2008-09 impacted us more than we thought previously. These inferences should be more a cause of worry since we seem to have underperformed, regardless of which government was in power, when.

Madan Sabnavis, chief economist at CARE Ratings, says “When economic modeling is done by different economists, it is but natural results can be very different. We should treat the current GDP exercise as a version provided by experts and not go beyond. Earlier exposition showed the opposite and hence using a new method on old series will always lead to debates”.

The numbers which have fired up everyone are the back series of GDP, based on a new methodology and new base year of 2011-12 against the earlier base year of 2005-06. In simple terms, the new data is a set of calculations to show what the economic growth was during previous years, since the base year on which calculations are done, was changed by the Modi government in 2015. The government says it has used extensive data from varied sources to arrive at the new numbers.

For example, instead of using the growth in the number of subscribers for telecom, it has used a more accurate ‘minutes of usage’ statistic; it has used sales tax earnings to estimate growth in trade and made some changes in the way the contribution of the financial services sector was calculated.

Some months back, the Sudipto Mundle panel on Real Sector Statistics had come out with a report which said growth during UPA-I crossed the 10% mark in one fiscal year. The GDP growth in 2006-07 was 9.57% under the old method (when a different base year was used) but jumped to 10.08% under the Mundle method.

The Mundle report was the first attempt by the government to put forth growth estimates using the new base year, 2011-12. But stung by the revelation that the growth during the two UPA terms emerged higher with this panel’s report, the Modi government first tried to take down the Mundle report from the website and then added a disclaimer saying the report wasn’t final and not authenticated by it. At that time, the Congress party had hailed the numbers, underlining the fantastic double digit growth the country witnessed under its rule and mocking the Modi government for its inability to match the growth seen in the UPA era.

D K Srivastava, chief policy advisor at EY, pointed out that Mundle used econometric method for splicing the GDP series, which is a statistical method. “The new method used on Wednesday has taken sector wise information - varied and larger sources of data, data sources consistent with data used for 2011-12 series onwards.” Srivastava also said that one should look at India’s potential growth and how close we are to that potential. “Given our savings and investment ratio, potential growth appears to be 8-9% and if we are close to that, we are okay. Double digit even when achieved was only for one year and this should not be a crucial issue. How consistently have we remained close to our potential growth is what matters. We have been under-performing in most years.”

As polls draw close, mere growth numbers wouldn’t perhaps have as large an impact on the electorate as actual economic growth indicators such as job creation. Perhaps the warring politicians would do better to focus on growth deliverables.

(The author is a senior journalist. Views are personal.)
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