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Disagreeing with estimates, it came out with a statement today, saying the upward trend in the economy was not captured by the numbers, released yesterday.
Earlier in the day, Chief Economic Adviser Raghuram Rajan raised questions over CSO's estimation. Yesterday, Planning Commission Deputy Chairman Montek Singh Ahluwalia, too, had raised issues over methodology of advance estimates as it was based on linear projections.
The finance ministry said in a statement here: “This (methodology) makes its (Central Statistics Office) estimates accurate when GDP growth is following a trend, but not when it is turning.” It says CSO bases its advance estimates on data till November or December, depending on availability.
Advance estimates’ data are based on actual GDP data of the first half of a financial year under review, industrial production data for November and some data for December. For the rest of months, projections are based on data of the previous year.
To buttress its point of view, the ministry provided the data of advance estimates, revised estimates, quick estimates (second revision) and final numbers since 2005-06. Based on these data, it said, “Growth was overestimated as the economy slowed in 2008-09 and 2011-12, while it is probably underestimated now.”
In 2008-09, the declining trend that appeared after December was not captured in the data and statisticians said the economy was on an upward march despite the crisis. The same thing happened in 2011-12, analysts said. Basically, when the economy has been growing and it suddenly changes track, growth is overestimated. When the economy is slowing down and it suddenly starts growing, growth is underestimated by advance estimates.
As GDP growth is turning, the ministry said it was likely that the advance estimates of five per cent growth will be revised and the final estimate will be closer to the government's estimate of 5.5 per cent or slightly more. Both five per cent growth and 5.5 per cent growth represent a decade low.
It reiterated the point that five per cent economic growth is indeed disappointing. “However, in the past years, advance estimates have been revised more than once as more data is available to the CSO,” the ministry said.
Earlier in the day, Rajan had said there were some problems in the CSO’s estimates of growth. “When there is uptrend in growth, growth forecasts are likely to be an overestimation, just when growth is going down, forecasts are an underestimation,” he said.
Ahluwalia had questioned the manner in which the data has been calculated, saying CSO has ignored the rising growth trend while working out estimates for 2012-13. “I am not certain that whether they (CSO) have done it in a correct way. In the past also, the quarterly (GDP) data was very frequently adjusted,” he had said.
The CSO advance estimates showed that GDP growth would come down to a 10-year low of five per cent against 6.2 per cent in 2011-12. The economy grew by 5.4 per cent in the first half of this financial year, and estimates implied that it would expand by less than five per cent in the second half.
Ahluwalia had said: “I get the impression that they (CSO) have not actually addressed the question could it be that the (decline in the) economy bottomed out, in that case straight forward linear projection would not be right.”
Independent economists raised larger issues, saying the quality of data itself is a problem. “The problem is not whether the CSO has data or not, but if the data that is available in India itself is quite problematic,” Anis Chakravarty, an economist with Deloitte India, said.
D K Joshi, chief economist with CRISIL, said the government measures have improved sentiments, but its impact on investments will be there in the next financial year.
