Skip to main content

Economist in Govt of India panel questions methodology used for "showcasing" higher industrial growth in GDP

By Our Representative
Three senior economists, one of whom is a member of the Monetary Policy Committee of the Reserve Bank of India, Prof Ravindra H Dholakia, have questioned the methodology adopted by the Government of India in 2015 for calculating gross domestic product (GDP), suggesting, while replacing the base year from 2004-05 to 2011–12, a much higher industrial growth rate has been estimated than what actually is the case.
Apart from Prof Dholakia, who is with the Indian Institute of Management, Ahmedabad, those who have questioned the methodology in recent paper published in a prominent journal are R Nagaraj, who is with the Indira Gandhi Institute of Development Research, Mumbai, and Manish Pandya, who is with the Directorate of Economics and Statistics, Government of Gujarat.

Prof Dholakia
The economists say, the manufacturing sector estimates in the new series are already in the eye of the storm, "since its share in GDP at current prices is larger by about two percentage points (compared to the old series), and its annual growth rates are significantly higher -- with a change even in the direction of growth in some cases".
"For instance", according to them, "For 2013-14, the growth rate of manufacturing gross value added (GVA) at constant prices swung from (-)0.7% in the old series, to (+)5.3% in the new series", underlining, "Such wide variations in the growth rates for the same years reported by the two series of the same publication, expectedly, drew widespread criticisms, especially since the new estimates were quite at variance with other macro correlations."
The economists say, "The changeover to the corporate sector database -- obtained from the Ministry of Corporate Affairs (MCA) -- is said to include activities that were hitherto left out by the Annual Survey of Industries (ASI), on account of the limitation of its approach to data collection."
Suggesting that the ASI's data collection of registered manufacturing sector units, consisting of all factories employing 10 or more workers using power (or, 20 or more workers without using power) based on their mandatory registration under the Factories Act, 1948 is broadly correct, the economists say, "A careful perusal of the ASI’s Instructions Manual ... amply demonstrates that the official contention is largely incorrect."
Screenshot from the paper
Setting aside the claim of those who have worked out the new GDP series to capture a higher growth rate by including manufacturing value added of all enterprises employing 10 or more workers, the paper says, "The ASI, in fact, captures employment, investment, and value added of activities outside of the factory, such as the head office, R&D, sales and services, and so on that are part of the enterprise in most of the cases."
Corroborating these findings with the ASI filled-in questionnaires for select enterprises and their factories operating in Gujarat and elsewhere, the paper says, "Information gathered from the field supports our contention: the ASI, in fact, includes value addition in activities outside of factories such as company headquarters and sales force."
Giving the examples of Ambuja Cement, Navneet Education Limited, Zydus Cadila, Arvind Limited, Tata Chemicals, and Reliance Industries, all of whom have units in Gujarat, the economists say, in two of the six cases (Navneet and Arvind), some discrepancy could be found, but this "cannot be generalised to the ASI as a whole".
Pointing out that in even in these two cases, "it is only a matter of chance and probability", the economists insist, this has happened on account of probability of under-reporting and not confirmed under-reporting."
The examples cited, according to them, "contradict the official claim to a large extent", adding, "Therefore, the very basis of the change in the approach to data collection for estimating manufacturing GDP seems questionable."
The economists state, "Hence the higher share and faster growth rate of manufacturing sector reported in the new GDP series seems to have little justification based on mere coverage of ASI." They emphasize, "There may, however, be other reasons for expecting the size of the sector and its growth rates to be higher, but the arguments put forth against the ASI as under-reporting value added in manufacturing do not seem to be convincing."
The economists say, the new series with the base year 2011–12 shows that the manufacturing sector’s share in GDP at current prices is significantly higher, and its growth rate much higher than those reported in the older series (with 2004–05 base year)", concurring with those who have questioned it.
"The large divergence gave rise to serious doubts about the veracity of the new estimates. Moreover, the reported high growth rates were at variance with other macroeconomic correlates", the economists say.
They add, "Considering the known limitations of the corporate financial database of MCA and its methodological shortcomings, critics have wondered if the revised GDP series has overestimated the size and growth rate of manufacturing sector value added."

Comments

Niranjan Dave said…
People are used to be taken on ride. Look at shameless claims of FM.

TRENDING

Top upper caste judges 'biased' towards Dalit colleagues: US Bar Association report

By Rajiv Shah  A high profile report prepared by the influential  American Bar Association (ABA) Center for Human Rights , taking note of the fact that “in the 70-year history of the Indian Republic, only six Dalit judges have been appointed to the Supreme Court”, has taken strong exception to what it calls “lack of representation of Dalits” in the legal profession and the judiciary.

Savarkar 'criminally betrayed' Netaji and his INA by siding with the British rulers

By Shamsul Islam* RSS-BJP rulers of India have been trying to show off as great fans of Netaji. But Indians must know what role ideological parents of today's RSS/BJP played against Netaji and Indian National Army (INA). The Hindu Mahasabha and RSS which always had prominent lawyers on their rolls made no attempt to defend the INA accused at Red Fort trials.

Billion vaccine doses? Devil is in details: 70% haven't got 2nd jab; numbers jacked up

By Prof Ujjwal K Chowdhury*  India has reached the one billion Covid-19 vaccinations milestone. It is indeed a great news and a big salute to the less paid ordinary health-workers in interiors of India for this feat. The government wants all of India's 944 million adults to get vaccinated this year. Around three-quarters of adults in the country of 1.3 billion people have had one shot and around 30 percent are fully vaccinated, the government says.

Buddhist shrines were 'massively destroyed' by Brahmanical rulers: Historian DN Jha

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

Failure of 'trickle down theory' behind India's poor Global Hunger Index rating

By Dr Gian Singh*  On October 14, 2021, two organisations, Concern Worldwide (An Irish aid agency) and WeltHungerHilfe (a German organization that researches the problem of global hunger), jointly published the Global Hunger Index (GHI) for 2021. These organizations have included 116 countries in the world hunger rankings.

Global Hunger Index: Govt of India response pathetic, 'lacks' scientific empirical evidence

By Fr Cedric Prakash SJ* Come 16 October – and the world once again focused on the most basic need for a person’s survival: food! The first World Food Day was observed in 1994, to mark the launch of the Food and Agriculture Organization (FAO) of the United Nations. Ever since, the day is marked to highlight the need and importance of food security across the world. The significance is accentuated especially in these difficult times like the C-19 povidandemic. The theme for 2021 is ‘Safe Food Now for a Healthier Tomorrow’, emphasising on the various immediate and long-term benefits of consuming safe and healthy food.

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Fresh efforts to subsume Buddhism within Hindu fold 'undermining' Ambedkar

By Aviral Anand*  From Yeola in 1935, when Dr Ambedkar announced that he would not die a Hindu, to Nagpur in 1956 when he converted to Buddhism, is a considerable distance in time. But, there was in him a need to make a public announcement in 1935 about moving away from Hinduism. 

March opposes Sabarmati Ashram renovation: 'Mahatmaji had kept open for access to all'

Counterview Desk A Sevagram to Sabarmati march, which began on October 17 from Wardha (Maharashtra) and will end on October 24 in Ahmedabad (Gujarat), has demanded that the Sabarmati Ashram, the government should not impose "the fashion and glitz of a shallow modernity" at the cost of Rs 1,200 crore, in the name of renovating the Ashram founded by Gandhiji.

Nehru legacy? GDP-centric growth has had 'no positive impact' on people's livelihood

By Dr Kamal Nayan Kabra*  Experience has shown that many counties adopt measures to go in for the growth of their GDP, basically in the existing framework, though also going in for, at the same time, new products and technologies and similar other changes. It is believed that by means of this process enough new job opportunities would emerge to meet the economy’s needs both in terms of numbers as also in terms of the requisite remuneration (wages) as also the supplies of the goods and services to maintain the economy on an even keel.