Awdhesh Singh is teaching live on Unacademy Plus
GDP Controversy Dr Awdhesh Singh, IRS (Retd.) Director, Awdhesh Academy, Former Commissioner, Customs & Indirect Taxes (Central Excise/GST)
Revision of GDP numbers . In November 2018, the Central government issued revised GDP data for the 2005-12 fiscal years that lowered growth under the previous Congress-led UPA irn contrast with recalculated numbers that had been released in August.
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 . The new series includes corporate information from the MCA21 database of the Ministry of Corporate Affairs instead of the results obtained from the RBl 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.
Impact of GDP back series data 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 released by the government 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. -The average the four years of the present government is 7.35%.
Criticism by opposition parties "In its desperate attempt to rewrite GDP data, the government resembles the student who cannot pass an exam without cheating." (Congress leader Ahmed Patel) Niti Aayog's revised GDP numbers are a joke. They are a bad joke.... Actually they are worse than a bad joke. The numbers are the result of a hatchet job". (Former finance minister P Chidambaram)
Government's defence The government says that the GDP back series issued by the Sudipto Mundle committee in August 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
Political implications These numbers would become a potent political weapon for the BJP which can claim it had performed better on the economic front than the previous UPA government.
References economictimes.indiatimes.com/newslet-explains/ wanted-to-know-about-the-ongoing-gdp-data-ro all-you-wanted-to-knoW-abou