Friday, June 03, 2016

India's GDP growth 5.2% in 2015-16 against 7.1% in 2014-15, thanks to discripancies: Top consultants CMIE

By Our Representative
Sharply disputing the Government of India's estimate that India's gross national product (GDP) grew at 7.6 per cent in the financial year 2015-16, India's top statistical consultancy firm Centre for Monitoring Indian Economy (CMIE) has said that, according to its calculation, it should be 5.2 per cent, down from 7.1 per cent a year earlier.
CMIE says, “Of the 7.6 per cent growth in GDP for the year, 2.4 per cent came form discrepancies. The discrepancies amounted to Rs 2.2 trillion. Excluding discrepancies, India’s GDP would have grown by 5.2 per cent in 2015-16, as against a 7.1 per cent growth in 2014-15, which also excludes discrepancies.”
“That means the entire improvement or acceleration in growth rests upon the discrepancies figures”, it underlines.
According to experts, “discrepancies” make up the difference between estimation of GDP through the production side and expenditure side. They further explain it as the difference between aggregate of private consumption expenditure, government expenditure, investment and net export, and GDP estimated from production approach.
The larger the “discrepancies,” the more worried one is likely to get about the veracity of production side GDP, they believe.
Coming to the claim that in the last quarter of 2015-16 (January-March 2016), when the Indian economy “almost touched the 8 per cent magic growth figure”, as claimed by Niti Aayog's Arvind Panagariya, an economist from Columbia University hired by Prime Minister Narendra Modi, the CMIE says, things are “no different”.
CMIE underlines, “Of the 7.9 per cent growth in GDP during the quarter, 4.1 per cent came from discrepancies. Excluding discrepancies, the 3.9 per cent growth in GDP would have been the lowest in last 13 quarters.”
CMIE is not only expert body which has disputed Government of India data. The prestigious British daily, “Financial Times” (FT) through a blog “Discrepancies and Indian GDP data” by David Keohane has said that the claim of the country’s status as the world’s “fastest expanding large economy” and the “most dynamic emerging market” is a “qualified, confusing good news.”
It quotes Goldman noting as noting that the “data from the expenditure side shows that the improvement in GDP growth in Q1 (of 2016) was largely driven by higher private consumption and relatively lower drag from net exports.”
Further: “Fixed investment declined for the first time since March 2014... A significant fraction of headline GDP growth is unexplained as ‘discrepancies ‘ amount to 4ppt of GDP vs 2.1ppt in the previous quarter (the discrepancy is the difference with the industry GDP data, which are used as the control). ”
The FT bog also quotes SocGen as saying, “At 7.9% yoy, it was the strongest growth rate recorded in the past six quarters. Domestic demand, which has been holding up fairly well this year, emerged as the largest contributor to growth (8.3% yoy).”
However, SocGen underlines, “Unfortunately, discrepancy was the other major growth driver, raising questions about the continued poor quality of data. Discrepancy was as high as 4.8% of GDP, the highest ever in the history of the new data series, and accounted for virtually 50% of the increase in real GDP. ”
It also quotes CapEcon’s Shilan Shah as saying that India's GDP figures “are hard to align with other evidence on the economy’s health. For instance, today’s data show manufacturing expanding 9.3% y/y last quarter. By contrast, the monthly data on industrial production show output rising just 0.2% y/y in Q1, from growth of 1.8% y/y in Q4.”
Shah further says, “Admittedly, there is reason to believe that economic growth has picked up recently. For example, auto sales and cargo volumes have accelerated. But the short point is that – as we have cautioned since the release of the revised GDP series last year – we should take the official GDP data, and the world-beating rates of growth they are suggesting, with a pinch of salt. ”

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