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

Mallika Sarabhai releases speech she was 'not allowed' to give at NID Convocation on Feb 7

Counterview Desk
The National Institute of Design (NID) in Ahmedabad, a Ministry of Commerce and Industry body, landed itself in controversy following its decision to put off its 40th convocation ceremony, where noted danseuse Mallika Sarabhai was invited as chief guest. The ceremony was scheduled to be held on February 7.

Modi, Shah 'forget': Gandhi’s first Satyagraha was against citizenship law of South Africa

By Nachiketa Desai*
Hindu fanatic Nathuram Godse assassinated Mahatma Gandhi once on January 30, 1948 but his followers raising the war cry of ‘Jai Sriram’ are killing the Mahatma every day. In his home state of Gujarat, Gandhiji was killed a thousand times in 2002 when over 2,000 Muslims were butchered, their women raped, homes and shops plundered and set on fire and even unborn babies ripped out of the wombs of their mothers.

As corona virus 'travels' to rural areas, NGO begins training tribals, marginalised women

By Souparno Chatterjee*
The World Health Organization (WHO) has declared corona virus a pandemic. Originating from Wuhan in China, it has traversed the entire globe, almost, and claimed more than 16,000 lives already. That’s largely the urban population. In India, despite all the preparedness and war-like promptness to safeguard against the pandemic, several lives have been lost , and hundreds of individuals have tested positive.

Rani Laxmi Bai, Tatya Tope 'martyred' by East India Company, Scindia's forefathers

By Our Representative
In an email alert to Counterview, well-known political scientist Shamsul Islam has said that was “shameful for any political party in democratic India to keep children of Sindhias in their flock” given their role during the First War of Indian Independence (1857). In a direct commentary on Madhya Pradesh Congress leader Jyotiraditya Scindia moving over to BJP, Prof Islam has quote from a British gazetteer to prove his point.

COVID-19: Dalit rights bodies regret, no relief plan yet for SCs, STs, marginalized

By Our Representative
In a letter to Prime Minister Narendra Modi, the National Dalit Watch-National Campaign on Dalit Human Rights, endorsed* by several other Dalit rights organizations, have insisted, the Government of India should particular care of the scheduled castes and tribes, trans folks, persons with disabilities and the women and children from these communities, while fighting against COVID-19 pandemic.

Big 'danger' of NPR: A babu can tag anyone as doubtful citizen, Jharkhand meet told

' By Our Representative
People in large numbers from across Jharkhand gathered at the Raj Bhawan in Ranchi to demand that the Hemant Soren government reject National Population Register (NPR) and stop all NPR-related activities. The people’s organisations which participated in the dharna under the banner of the Jharkhand Janadhikar Mahasabha (JMM) resolved to intensify their struggle, insisting, NPR is not a Hindu-Muslim issue but is essentially anti-poor.

Gujarat govt plan to 'banish' Gandhian activist anti-democratic, unconstitutional

By Rohit Prajapati*
The current Central and Gujarat governments, and their bureaucracy, have been and are still unable to answer and address the concerns raised, with facts, figures, and constitutional provisions, regarding the terror of tourism in the name of the Statue of Unity and tourism projects surrounding it.

Coronavirus scare ‘pushing’ people from Northeast India into more hardship

By Rishiraj Sinha, Biswanath Sinha*
“No one is born hating another person because of the colour of his skin, or his background or his religion. People learn to hate, and if they can learn to hate, they can be taught to love, for love comes more naturally to the human heart than its opposite.” – Nelson Mandela
***

Haridwar Swamis lead Khudai Khidmatgar peace march in Delhi 'riot affected' areas

By Our Representative
A Khudai Kidmatgar team, which visited the riot-affected regions along with Swami Shivanand Saraswati and Swami Punyanand, has insisted that India's true heritage is the lesson of ‘vasudhaiv kutumbakam', and it is the responsibility of all to carry froward this legacy. Originally founded by Khan Abdul Ghaffar Khan in 1930, also known as Frontier Gandhi, Khudai Khidmatgar is claimed to have been revived by young Gandhian activist Faisal Khan in 2011.