Revised GDP Back Series data: All you need to know about the new GDP data.

The BJP-led NDA government and the opposition parties are fighting over a set of numbers which is not just economic data but has the potential to be used as a potent weapon in the Lok Sabha polls next year. Yesterday, the government issued revised GDP data for the 2005-12 fiscal years that lowered growth under the previous Congress-led UPA in contrast with recalculated numbers that had been released in August. Why did they do it? What does it mean? What could be its implications? Read below to know:

The new base year

From January 2015, the Central Statistics Office (CSO) updated base year for GDP calculation to 2011-12, replacing the old series base year of 2004-05, as per the recommendations of the National Statistical Commission. Base year is carefully selected because of the impact it has on the numbers and the year chosen is usually one in which no serious anomaly was present. The new series includes corporate information from the MCA21 database of the Ministry of Corporate Affairs instead of the results obtained from the RBI study on company finances, which means a more comprehensive inclusion of corporate data in GDP numbers. It also helps improve accuracy, particularly for the services sector, which accounts for about 60 per cent of GDP.

Why is base year changed?

Change of base year to calculate GDP is done in line with the global exercise to capture economic information accurately. Ideally, the base year should be changed after every five years to capture the changing economy. GDP based on 2004-05 did not reflect current economic situation correctly. The new series is also compliant with the United Nations guidelines in System of National Accounts-2008. It takes information for the corporate sector and has better estimates of the unorganised sector from 2010-11 National Sample Survey on unincorporated enterprises and data on sales and service taxes.

What is GDP back series?

After the base year is changed, the GDP in previous years is revised according to the new base year for a fair comparison. The back series that the government released yesterday adjusts GDP numbers for fiscal years 2005-12 using new methodology with FY12 as the base year.

The back series shows that GDP growth in the UPA years was slower with the peak of 10.3% in FY11 — now scaled back to 8.5%. According to the back series, the four years of the current government show higher average growth than that achieved during the UPA years. The average growth for the UPA years after the back-series revision for FY06 to FY12 declines to 6.82% from 7.75% earlier, well below the 7.35% clocked during the four years of the present government.

Why are opposition leaders criticising the numbers?

The reason why opponents have criticised this GDP revision methodology is another such attempt carried out in August this year. The August recalibration had thrown up different numbers, showing the previous UPA governments doing better than the present NDA government. The August numbers had been calculated by the Sudipto Mundle committee set up by the National Statistical Commission. That recalculation bumped up growth during the UPA years based on the so-called production-shift method. That showed growth to be faster in FY04-FY12 and lower before that in 1994-95, triggering a war of words between the BJP and Congress, with the latter claiming India did better under the UPA.

That's why now the opponents, especially the Congress leaders, are criticising the new numbers. “In its desperate attempt to rewrite GDP data, the government resembles the student who cannot pass an exam without cheating,” Congress leader Ahmed Patel said. Former finance minister P Chidambaram said the revised GDP numbers were "a bad joke".

What is the government's defence?

The government says that the August numbers — which had bumped growth during the UPA regime — were not actual but experimental. It says the GDP back series issued by the the Sudipto Mundle committee amounted to “experimental results” meant to facilitate a decision on the approach to be followed and were not official estimates. It says the back-series GDP data is the result of hard work of CSO officials who had recalibrated the growth figures, and that these numbers were thoroughly vetted by leading economists before being made official. Refuting opposition's charges that growth rate of UPA has been revised lower on the directions of the government, Finance Minister Arun Jaitley said today the CSO was a highly credible organisation and maintains arms length distance from Finance Ministry. "UPA had welcomed CSO decision when it revised FY13, FY14 GDP growth upwards. The same yardstick has been applied by CSO while revising growth downwards," the finance minister said.

What do experts say?

Former chief statistician Pronab Sen has questioned the involvement of Niti Aayog. “Involving Niti in the GDP story is strange. It gives out signals that CSO (Central Statistics Office) lacks capability while the Aayog has all the intellectual prowess,” an economist, who did not want to be identified, told ET.

However, the chief statistician has said that the back series was compiled by CSO and it was just a joint press conference with Niti Ayog. According to many independent experts, the new numbers don't alter the overall trajectory. “Directionally, the new series is similar to the old series, which suggests that the latter was not misleading the policymakers on whether the pace of growth was accelerating or slowing down,” said Aditi Nayar, principal economist, ICRA. Devendra Kumar Pant, chief economist, India Ratings, said the data showed minor change. “Even this data shows deceleration in investment rate from 39.8% in FY11 to 30.6% in FY18 and decline in gross savings rate to 29.6% in FY17 from 36.2% in FY11. These are major economic challenges which Indian economy is currently facing,” he said.

Political implications

When GDP back series numbers calculated by the Sudipto Mundle committee came out in August, the Congress leaders gloated that it was conclusively proven that the UPA government had done better than the current NDA government. However, the final numbers released yesterday show the opposite. These numbers will certainly become a potent political weapon for the BJP which can claim it had performed better on the economic front than the previous UPA government (Source: The Economic Times)