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The latest gross domestic product (GDP) estimates have been criticised by some as not reflecting the realities. T C A Anant, chief statistician, Government of India, contends the new numbers capture industry's value addition more comprehensively. In an interview to Indivijal Dhasmana and Ishan Bakshi, he elaborates on the changes in methodology. Edited excerpts:
Critics are saying the headline Gross Domestic Product (GDP) numbers do not reflect the ground reality, with the Index of Industrial Production (IIP), bank credit and tax numbers indicating sluggish growth.
The higher growth can be looked at in comparison to the old series in broadly two components - the higher growth in manufacturing and in certain segments of the service sector. There has been a significant change in the way the value added in manufacturing is measured. Earlier, this was done by a combination of IIP and the Annual Survey of Industries (ASI) data. The first set of estimates we produced in any year were based on IIP; these would be revised two years later, when the ASI data became available.
The new series modifies this by incorporating corporate data from the MCA21 database and where this is not available, from an RBI (Reserve Bank of India) study and filling before the BSE (stock exchange), which are mandated under Sebi (the market regulator) rules to generate corporate estimates.
This has had two implications. First, corporate performance has exceeded IIP. The second element is that we have shifted from establishment to the enterprise. So, we are capturing a larger chunk of the value-added chain than was reflected in ASI. Earlier, this part was not adequately captured.
An increase in value-added suggests significant efficiency gains.
Increases in value addition can be traced to efficiency, technical change, corporate practices. This disconnect between growth in value-added and volumes is not unique to India. A large number of countries in Europe and North America have after the financial crisis seen GDP revival without any improvement in employment figures.
When ASI data comes after 18 months, will this lead to changes in GDP?
It is less likely. The sort of jump which used to take place from IIP to ASI will not happen.
These numbers will have ramifications for policy making. For instance, the stance of monetary policy.
Other countries have also talked about the need to look at volumes. In India, the only high-frequency indicator of volume is IIP. The second indicator is ASI. We are also putting in place a mechanism to track employment. In other countries, these questions are also linked to volume by looking at what is happening to employment. Volume indicators should not be ignored in the exercise.
After the latest estimates, many people are comparing India and China's growth. How do you look at this comparison?
Growth comparisons are not very useful because they are appropriate only after an understanding of the levels. Second, growth comparisons are useful only when you have a time series pattern of growth. At the moment, we don't have that until a back series is worked out.
China's historical series has averaged 10 per cent (annually) for a very long time and dipped down to seven per cent. My historical series and the current series are not comparable. Once we build it, comparisons are possible. But in any case, growth comparisons without some adjustment of levels is not very meaningful.
The Economic Survey provides growth projections. Do you think it will take GDP at market prices or at basic prices?
They are free to project GVA (gross value added) at basic prices. The information is there. Reporting of GVA is not wrong.
