New Delhi: A new government-commissioned study that provides gross domestic product (GDP) data as per the new series, with the baseline of 2011-2012, shows that India achieved higher growth rates than previously thought from 2003-2004 to 2012-2013.
Over the last three years, economists and policy-makers have questioned the government’s ability to compare India’s GDP growth over a long period of time. This is because the Central Statistics Office (CSO) changed the method by which it calculated GDP in 2014-15. The CSO essentially changed the base year for calculation from 2004-2005 to 2011-2012. All GDP data released from 2015 onwards used the new methodology.
However, the Modi government has for the last three years not released what economic experts call the ‘back series data’, which is essentially calculating what India’s GDP would have been in the earlier years (before it changed the way it calculated the GDP) using the new methodology.
A recently released study on ‘real sector statistics’ – constituted by the National Statistical Commission, which comes under the Ministry of Statistics and Programme Implementation – provides this back-series data going all the way back to 1994-95. This, consequently, allows for a comparison of growth trends between the two different methodologies (2004-2005 and 2011-2012).
India’s GDP growth rates (FY’05 to FY’18)
|FY||GDP (2004-05 baseline)||GDP (2011-12 baseline)|
Source: MOSPI, Report of the Committee on Real Sector Statistics
While the data show that the two GDP series calculated similar growth trends directionally-speaking – there are no large-scale variations – the new series shows higher growth rates from 2003-2004 onwards.
For instance, it shows that the economic performance of the Manmohan Singh-led UPA-I government was better during its first four years compared to the current Narendra Modi-led NDA government.
As per the back series data compiled by the committee on real sector statistics, the average GDP growth rate from 2004-05 to 2007-08 works out at 9.42% compared to 7.15% during 2014-15 to 2017-18. Moreover, it was also on Manmohan Singh’s watch that the Indian economy scored a double digit economic growth in 2007-08 (10.23%) for what is likely the first time ever. The UPA government repeated this double digit performance in 2010-11.
What is even more surprising is that the average GDP growth during the last four years of the UPA-II government, which is known for policy paralysis, is also higher at 7.39%.
GDP growth as per new series. While it is interesting to compare aggregate GDP growth, its is equally important to look at what caused it and whether it was supported by sustainable fiscal/monetary policies pic.twitter.com/3585Z7W3eC
— DK Joshi (@EconomistDK) August 17, 2018
The committee, which was set up by the National Statistical Commission, undertook its work through sub-committees. The sub-committee on linking new and old series GDP was chaired by N.R. Bhanumurthy, professor, National Institute of Public Finance and Policy (NIPFP).
Bhanumurthy told The Wire, “The sub-committee has tried to present a methodology that will generate a long series for GDP numbers until 1993-94, which are more critical for any macroeconomic research on the Indian economy.”
India has overtaken China to become the world’s fastest-growing economy in recent years, a fact that the NDA government has used to burnish its economic credentials and claim that it has performed better than the previous administration. However, the data tell a different story.
Significantly, the UPA-II government fared better than the NDA despite the headwind of high oil prices that it faced.
Economic decisions like demonetisation and implementation of goods and services tax (GST) taken by the Modi government have proved disruptive and slowed down the economic growth rate. Another major reform unveiled by the Modi government, the Insolvency and Bankruptcy Code, has not yielded desired results as the National Company Law Tribunal (NCLT) is facing legal hurdles to complete the proceedings in a time-bound manner.
It is true that India has become the world’s sixth largest economy, supplanting France. Meanwhile, the World Bank has forecast that India will remain the world’s fastest-growing economy over the next three years too. The World Bank, in its June Global Growth Prospect report, has projected a growth rate of 7.3% for India in 2018-19 this year and 7.5% each for the next two years on the back of robust private consumption and strengthening investment.
In its bi-annual World Economic Outlook released in April, the International Monetary Fund (IMF) kept its growth projections for India unchanged at 7.4% for 2018-19 and 7.8% for 2019-20. It cited fading effects of demonetisation and GST implementation to justify its bullish projections.