Credibility of Official GDP Statistics
The recent GDP data release has sparked discussions about the reliability of official statistics, questioning how a major fuel-importing country could experience an economic boom amidst a global energy crisis.
Addressing Problems with Old GDP Series
- Double Deflation:
- The Ministry of Statistics and Programme Implementation (Mospi) has reportedly adopted double deflation, an approach where firms' nominal value added is deflated twice: once for output and once for inputs.
- Previously, Mospi deflated nominal data only once, unlike G20 countries, which could distort real GDP due to changes in input prices.
- However, Mospi has not provided sufficient details on the implementation of this method, raising questions about its application scope across sectors.
- Choice of Deflator:
- The Producer Price Index (PPI) is commonly used internationally, but India's statistical office lacked comprehensive price data for production inputs.
- The input PPI is reportedly under trial, and the services PPI only covers seven sub-sectors, leaving a gap for other service sectors.
Measurement of Informal Sector Output
- Mospi claims improvements through the survey of unincorporated enterprises (ASUSE) and the Periodic Labour Force Survey (PLFS).
- Despite this, the ASUSE does not offer value-added data, leaving questions about the actual estimation of informal sector GDP.
Big Picture Concerns
- The GDP data shows inconsistencies, such as a 1% fall in import volumes against an 8% economic growth and a 10% rise in the secondary sector.
- Import values rose by 31%, suggesting a significant import price increase, partially cushioned by government interventions, but not enough to counterbalance the economic impact.
Transparency and Trust
Despite Mospi's efforts, transparency issues persist. Detailed methodological information is lacking, and it is unclear which committee report recommendations were implemented. Mospi is encouraged to release a comprehensive sources and methods document to restore confidence in the GDP data.
Conclusion
The best way forward involves a spirit of cooperation between stakeholders and Mospi to identify and solve existing problems, thus rebuilding trust in official GDP statistics.
