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

Allow international human rights observers, media to access Kashmir: US lawmakers

Counterview Desk
In a letter to US Secretary of State Mike Pompeo, two members of the American Congress, Pramila Jayapal and James McGovern, raising "significant concerns" about what they call "humanitarian and human rights crisis in Jammu & Kashmir”, quoting "credible reports" from journalists and advocates on the ground" have said that "the Indian government has detained thousands of people with no recourse, imposed de facto curfews on residents' and cut off internet and telephone access in the region.”

Rescind Gates Foundation award to Modi, demand three Nobel Peace laureates

Counterview Desk
In a major boost to those opposing the award to the Gates Foundation’s proposed to be awarded to Prime Minister Narendra Modi for his Swacch Bharat Abhiyan, three Nobel Peace Prize laureates, Mairead Maguire (1976), Tawakkol Abdel-Salam Karman (2011) and Shirin Ebadi (2003), have in an open letter called upon Milinda and Bill Gates to withdraw their decision, stating Modi is allegedly involved in human rights violations.

US Kashmiri diaspora body: World leaders, UN 'not acting', India enjoys total impunity

Counterview Desk
Ahead of the United Nations General Assembly session, to begin on September 17 in New York, Dr Ghulam Nabi Fai, secretary-general of the World Kashmir Awareness Forum, a non-profit organization based in Ohio, US, claiming to focus on providing information on Kashmir, has regretted that despite "violent" behaviour of Indian authorities in Kashmir, they enjoy "total impunity" across the world.

Jharkhand riverine terminal: 485 families 'displaced', lose land, livelihood in Sahibgunj

Counterview Desk
Even as Prime Minister Narendra Modi proposes to inaugurate on Thursday India’s second riverine Multi-Modal terminal (MMT) at Sahibganj in Jharkhand, built at a cost of Rs 290 crore reportedly in a record time of about two years, several civil rights organizations* have said that the government has failed to address the high-profile terminal’s social and environmental concerns.

Now clampdown on rally, arrest of pro-freedom activists in Pak-occupied Kashmir

Counterview Desk
In a fresh evidence, international human rights organizations are not just confining their attention on the Indian state of Jammu & Kashmir (J&K), whose special status was taken away by the Government of India in early August, leading to an unprecedented clampdown on the region. They have simultaneously begun focusing on the Pakistan-occupied Kashmir (PoK), where the situation is said to be worsening.
Thus, the International Human Rights Council ((IHRC) Hong Kong (HK), a top human rights organisation, said to be working towards to the promotion peace, equality, fundamental rights and social justice “as enunciated in the UN Human Rights Charter and other instruments of human rights”, has noted now a new wave of independence movement has struck PoK.  With offices in US, UK, Switzerland and Hong Kong, and having Kirity Roy and Lenin Raghuvanshi as IHRC office bearers from India, in a statement, it has claimed that on September 7 one of the biggest pro-Independenc…

Gujarat's incomplete canals: Narmada dam filled up, yet benefits 'won't reach' farmers

Even as the Gujarat government is making all out efforts to fill up the Sardar Sarovar dam on Narmada river up to the full reservoir level (FRL), a senior farmer rights leader has said the huge reservoir, as of today, remains a “mirage for the farmers of Gujarat”.
In a statement, Sagar Rabari of the Khedut Ekta Manch (KEM), has said that though the dam’s reservoir is being filled up, the canal network remains complete. Quoting latest government figures, he says, meanwhile, the command area of the dam has been reduced from 18,45,000 hectares (ha) to 17,92,000 ha.
“According to the website of the Sardar Sarovar Narmada Nigam Ltd, which was last updated on Friday, while the main canal, of 458 km long, has been completed, 144 km of ranch canals out of the proposed length of 2731 km remain incomplete.
Then, as against the targeted 4,569 km distributaries, 4,347 km have been constructed, suggesting work for 222 km is still pending. And of the 15,670 km of minor canals, work for 13,889 km ha…

US Air Force expert smells regional security threat following Chandrayaan mission

Counterview Desk
A United States Air Force expert, writing on India’s Chandrayaan -2 mission, has expressed the apprehension that Indian moon probe’s “failure” won’t stop an Asian space race that “threatens regional security.” Affiliated with the US Air Force School of Advanced Air and Space Studies, Wendy Whitman Cobb, who is Professor of Strategy and Security Studies, believes like other space powers, India may be “seeking to improve its technology”, but advances can “also bring greater security concerns.”
Currently, admits Cobb, “These efforts have been primarily civilian and peaceful in nature.” However, India’s turn toward the military uses of space, so much so that lately it has been developing its own military satellites providing services such as remote sensing, tracking and communications “with greater frequency” has begun to “concern” the neighbours.
In her disclosure statement to an article published in the e-journal “The Conversation” Cobb, however, states that whatever…

South Gujarat wastewater carrying pipeline damaged, 'harming' farmlands

The pipeline carrying industrial wastewater to the Gulf of Khambhat from Jhagadia industrial estate in Bharuch district has been found to have damaged for the eighth time over the last one and a half months. The crack, says a local environmental organisation, has occurred at Hansot, endangering agricultural farms.

Historic Chikhalda, temples, mosques submerged, activists 'rescue' Gandhi idol

By Medha Patkar
The first farmer of Asia was born in Chikhalda, if one is to believe archaeological researchers. A historic village, 50 percent of its population is of Hindus and 50 percent of Muslims, yet it has always remained peaceful. Chikhalda has struggled to save water, land and people along Narmada river.

Ceramic worker dies: 20,000 workers in Thangadh, Gujarat, 'risk' deadly silicosis

Even as the country was busy preparing for the Janmashtami festival on Saturday, Hareshbhai, a 46-year-old ceramic worker from suffering from the fatal lung disease silicosis, passed away. He worked in a ceramic unit in Thangadh in Surendranagar district of Gujarat from 2000 to 2016.
Hareshbhai was diagnosed with the disease by the GCS Medical College, Naroda Road, Ahmedabad in 2014. He was found to be suffering from progressive massive fibrosis. He is left behind by his wife Rekha sister and two sons Deepak (18) and Umesh (12),
The death of Hareshbhai, says Jagdish Patel of the health rights group Peoples Training and Research Centre (PTRC), suggests that silicosis, an occupational disease, can be prevented but not cured, and the Factory Act has sufficient provisions to prevent this.
According to Patel, the pottery industry in the industrial town of Thangadh has evolved for a long time and locals as well as migrant workers are employed here. There are about 180 units in in the to…