Credibility crisis of India’s statistical data

Geetima Das Krishna

(The author is a research scholar at IIFT. She can be reached at geetima-dk@yahoo.com)

PART-II

Confusing data

The Central Statistics Office (CSO) had announced a new GDP series in 2015 with a new base year (changed to 2011-12 from 2004-05) and a new methodology. However, the back series for the new series was not published. Without a back series, the data was available only since 2011 and it was extremely difficult to understand the trend of the economy.

Finally, in July 2018, a special committee under NSC released GDP back-series showing that economic growth, as expected, was much higher during 2004-2008 boom period. The GDP growth had crossed 10 percent not once but twice – in 2007-08 and 2010-11. The opposition did not lose any time to take credit for higher growth rate during UPA government.

Strangely, soon after, the July back series was labelled as ‘only experimental and not official’. The final GDP back series published later showed growth to be much lower during UPA regimes compared to recent four years. This new series caught both economists and analysts by surprise as it contradicts almost all other data on the real’ economy, like car sales, investment, credit growth, tax revenues etc.

The opposition now accuses the BJP-led central government of manipulation of GDP data. The politicization and flip-flop of the GDP back series undermines the credibility of Indian statistical data.

Moreover, the fact that the back series was announced by Niti Aayog instead of CSO prompted many to question the authenticity of the data. Pronab Sen, ex-Chief Statistician of India said, ‘It’s a clear shift that NITI Aayog got involved in the generation of the new series. One gets the suspicion that it was not done by professional statisticians’. Sen criticised the methodology too. For example, he said, the earlier method looked at number of telecom subscribers but the new series looks at number of minutes consumed. There has been no improvement in productivity or quality. Sharp criticism has now pushed Niti Aayog to promise to look at the back series.

According to the new back series, Indian economy grew at an average of 6.7 per cent during four years of UPA I (2005-06 to 2008-09) and the five years of UPA II (2009-10 to 2013-14) - lower than the earlier average estimates of 8 per cent and 7 per cent (2004-05 as the base year) respectively. These growth rates are lower than the average 7.7 per cent growth rate (new series) seen during the first four years of the present NDA government. The growth during the boom year of 2007-08, is now downgraded from 9.8 per cent under the old series to 7.7 per cent under the new series. Unbelievably, this is lower than 8.2 per cent registered in 2016-17, the year of demonetisation.

One possible explanation for lower growth in real terms during 2006-2014 might be the high inflation numbers during that period. The consumer inflation averaged 8.5 percent between 2006 and 2014 as against only 4 per cent in the past four years. So, even though real GDP is lower during 2006-2014, the average nominal GDP growth at 15.2 per cent is higher by around 500 bps vs the average in last four years. However, many economists still remain sceptical.

As an economist and not a statistician, I can hardly comment of the methodological issues in the new GDP series. However, we can definitely look at some of the high frequency underlying data of economic activities over the years. There is no dearth of data to peruse. If the official data says that economy is growing at 10 per cent but the electricity consumption or car sales are down by 10 per cent, then there is certainly something not adding up.

It is found that the sharp scaling down of GDP growth rates during FY2005-08 does not reflect the trend in some key economic activities on ground. For example, the average annual growth in domestic car sales between FY05 and FY08 was 14.7 per cent, while it was just 4.1 per cent between FY15 and FY18. Two-wheeler sales growth was 9.8 and 8.1 per cent, while Commercial vehicle sales were 19.1 and 7.9 per cent during those two periods respectively.

Even average growth in non-oil exports stood at 22.3 per cent during FY05 to FY08 which slowed to mere 1.6 per cent during FY15 to FY18. Similarly, the credit growth was at 29.6 per cent vs 9.5 per cent. The corporate tax grew at average 32 per cent in the first period compared to 9.4 per cent in the second. The tourist arrivals, cargo handled at major ports, rail freight etc all point at increased activities during FY 2005-2008 compared to FY 2015-2018.

It seems that the estimated GDP values are not in consistence with other related variables. Hence, the doubts over the veracity of the back series remain. The controversy surrounding the GDP back series may not die down any time soon.

Political will for reliable data

The government has access to large sets of data in the economy and has the bandwidth to collect the data, collate it and publish estimates. No independent researcher can collect all these data. In a large, complex country like India with an equally large intertwined informal sector, measurement errors are inevitable. However, any growth data should be in line with other data on ground-level economic activities. Researcher can only check and point out inconsistencies in the data but cannot claim that the data put out by government statistical agencies are wrong.

Recent resignation of two non-government members of India’s NSC over alleged suppression of unflattering job data complicates the matter further. The NSSO survey on job data that shows record 45-year high unemployment rate should be made public. If there are problems in the methodology, it should be discussed, debated and corrected, instead of swiping the whole report under the carpet. If our growth rates are revised to show enviable expansion of the economy, jobs must have been generated.

The latest data on the ground does not paint any pretty picture. Private investment has not picked up meaningfully. New and completed projects in the quarter ending December 2018 have declined while shelved or abandoned projects have increased. It is worrisome that private consumption had also moved lower in quarter ending September 2018 due to sluggish rural wage growth. It is expected to slow further in December quarter due to tighter liquidity conditions during that time. In all probability, the GDP growth rate in December 2018 quarter will be lower but there is no guarantee that it will not be revised higher later.

It is important for the CSO to make the whole process more transparent, get the new GDP series vetted by statistical experts and economists. Unreliable statistics can be problematic for a capital deficient emerging economy like India as it can easily send conflicting signals and lead to loss of trust among international investors. The Devil is in the underlying data. Credibility is hard earned over many years and it can be lost in a moment. (Concluded)