Introduction:

• Three years after the shift to the new base year of 2011-12, the CSO and NITI Aayog, in a join press conference, released the back seriesdetailing growth numbers for 2005-06 to 2011-12.
• In its new GDP back series data, average growth during UPA regime is down from previous estimates while growth during NDA is pegged higher than during UPA.

Do you know?

• Mundle expert panel, which was constituted to prepare the back series under the revised methodology, had not come up with the counter-intuitive estimates that have just been released.
• They estimated the average GDP growth at market prices at 8.37% (2004-05 to 2008-09), and then 7.69% (2009-10 to 2013-014).

Three changes occurred in the revision that was first announced in 2015:

1. Base Year
2. Methodology from GDP at factor cost to GDP at market price (this is the international norm and the basis of the current government’s claim that this is what CSO has followed)
3. Method of estimating company output/revenue – which has been done in a much more detailed manner using new data collected by the Ministry of Corporate Affairs (MCA 21).

Questions are being raised from experts

• If most important indicators (provided below) of the Indian economy were better in 2004-2014, how is the GDP growth rate higher in estimates just released (7.4% per annum since 2014 and only 6.7% per annum in 2005-2014)?

Questions arise over the new GDP series for the following substantive reasons:

1. Agricultural growth rates at constant prices were much higher from 2004-05 to 2013-14 than since then.
2. Two back-to-back drought years (2014 and 2015) notwithstanding, policies have not been exactly supportive. (Also farmers agitation year after year has increased)
3. The Index of Agricultural Production, with a base of 100 for the triennium ending 2007-08, had risen to 129.8 in 2013-14. But after falling, it barely recovered to 130 in 2017-18.
4. Agriculture, like the non-agricultural informal sector, collapsed first after demonetisation and then after a poorly implemented Goods and Services Tax. Both measures affected output as well as jobs, especially in the unorganised sector which constitutes nearly half of GDP and half of all exports.
5. Exports have performed much worse in the last four years than over the preceding 10 years. Exports were only $50 billion in 2002-03, but had risen to $250 billion in 2010-11, and reached $315 billion in 2013-14. They have not recovered to that level even in 2017-18.
6. In 2003-04, India’s savings rate had risen from 9.5% of GDP in 1950-51, and stood at 25.9%. It rose sharply thereafter to peak at 36.8% — precisely because of a rise in per capita income growth — to a level unprecedented in India’s economic history, and not achieved since.
7. This rising savings rate contributed to an unprecedented increase in the investment to GDP ratio. Then the investment to GDP fell in the wake of the global economic crisis. It is investment that mainly drives growth. (Investment to GDP rise peaked at 36.8% in 2007-08 → 31.3% in 2013-14 →30.4% in 2014-15 → 29.3% in 2015-16 → 26.4% in 2017-18)
8. Index of Industrial Production (IIP, which consists of manufacturing, mining, electricity) also rose sharply during 2004-05 to 2013-14.

In crux, the entire exercise casts doubt on the credibility of India’s growth numbers.