Economist in Govt of India panel questions methodology used for showcasing high GDP

By Rajiv Shah
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.

September 07, 2018

Stronger India–Russia partnership highlights a missed energy breakthrough

By N.S. Venkataraman* The recent visit of Russian President Vladimir Putin to India was widely publicized across several countries and has attracted significant global attention. The warmth with which Mr. Putin was received by Prime Minister Narendra Modi was particularly noted, prompting policy planners worldwide to examine the implications of this cordial relationship for the global economy and political climate. India–Russia relations have stood on a strong foundation for decades and have consistently withstood geopolitical shifts. This is in marked contrast to India’s ties with the United States, which have experienced fluctuations under different U.S. administrations.

From natural farming to fair prices: Young entrepreneurs show a new path

By Bharat Dogra There have been frequent debates on agro-business companies not showing adequate concern for the livelihoods of small farmers. Farmers’ unions have often protested—generally with good reason—that while they do not receive fair returns despite high risks and hard work, corporate interests that merely process the crops produced by farmers earn disproportionately high profits. Hence, there is a growing demand for alternative models of agro-business development that demonstrate genuine commitment to protecting farmer livelihoods.

The Vande Mataram debate and the politics of manufactured controversy

By Vidya Bhushan Rawat* The recent Vande Mataram debate in Parliament was never meant to foster genuine dialogue. Each political party spoke past the other, addressing its own constituency, ensuring that clips went viral rather than contributing to meaningful deliberation. The objective was clear: to construct a Hindutva narrative ahead of the Bengal elections. Predictably, the Lok Sabha will likely expunge the opposition’s “controversial” remarks while retaining blatant inaccuracies voiced by ministers and ruling-party members. The BJP has mastered the art of inserting distortions into parliamentary records to provide them with a veneer of historical legitimacy.

A comrade in culture and controversy: Yao Wenyuan’s revolutionary legacy

By Harsh Thakor* This year marks two important anniversaries in Chinese revolutionary history—the 20th death anniversary of Yao Wenyuan, and the 50th anniversary of his seminal essay "On the Social Basis of the Lin Biao Anti-Party Clique". These milestones invite reflection on the man whose pen ignited the first sparks of the Great Proletarian Cultural Revolution and whose sharp ideological interventions left an indelible imprint on the political and cultural landscape of socialist China.

Thota Sitaramaiah: An internal pillar of an underground organisation

By Harsh Thakor* Thota Sitaramaiah was regarded within his circles as an example of the many individuals whose work in various underground movements remained largely unknown to the wider public. While some leaders become visible through organisational roles or media attention, many others contribute quietly, without public recognition. Sitaramaiah was considered one such figure. He passed away on December 8, 2025, at the age of 65.

Epic war against caste system is constitutional responsibility of elected government

Edited by well-known Gujarat Dalit rights leader Martin Macwan, the book, “Bhed-Bharat: An Account of Injustice and Atrocities on Dalits and Adivasis (2014-18)” (available in English and Gujarati*) is a selection of news articles on Dalits and Adivasis (2014-2018) published by Dalit Shakti Prakashan, Ahmedabad. Preface to the book, in which Macwan seeks to answer key questions on why the book is needed today: *** The thought of compiling a book on atrocities on Dalits and thus present an overall Indian picture had occurred to me a long time ago. Absence of such a comprehensive picture is a major reason for a weak social and political consciousness among Dalits as well as non-Dalits. But gradually the idea took a different form. I found that lay readers don’t understand numbers and don’t like to read well-researched articles. The best way to reach out to them was storytelling. As I started writing in Gujarati and sharing the idea of the book with my friends, it occurred to me that while...

The cost of being Indian: How inequality and market logic redefine rights

By Vikas Gupta We, the people of India, are engaged in a daily tryst—read: struggle—for basic human rights. For the seemingly well-to-do, the wish list includes constant water supply, clean air, safe roads, punctual public transportation, and crime-free neighbourhoods. For those further down the ladder, the struggle is starker: food that fills the stomach, water that doesn’t sicken, medicines that don’t kill, houses that don’t flood, habitats at safe distances from polluted streams or garbage piles, and exploitation-free environments in the public institutions they are compelled to navigate.

New RTI draft rules inspired by citizen-unfriendly, overtly bureaucratic approach

By Venkatesh Nayak* The Department of Personnel and Training , Government of India has invited comments on a new set of Draft Rules (available in English only) to implement The Right to Information Act, 2005 . The RTI Rules were last amended in 2012 after a long period of consultation with various stakeholders. The Government’s move to put the draft RTI Rules out for people’s comments and suggestions for change is a welcome continuation of the tradition of public consultation. Positive aspects of the Draft RTI Rules While 60-65% of the Draft RTI Rules repeat the content of the 2012 RTI Rules, some new aspects deserve appreciation as they clarify the manner of implementation of key provisions of the RTI Act. These are: Provisions for dealing with non-compliance of the orders and directives of the Central Information Commission (CIC) by public authorities- this was missing in the 2012 RTI Rules. Non-compliance is increasingly becoming a major problem- two of my non-compliance cases are...

Proposals for Babri Masjid, Ram Temple spark fears of polarisation before West Bengal polls

By A Representative A political debate has emerged in West Bengal following recent announcements about plans for new religious structures in Murshidabad district, including a proposed mosque to be named Babri Masjid and a separate announcement by a BJP leader regarding the construction of a Ram temple in another location within Behrampur.

Search This Blog