Pritam Bhattacharya writes in Mint on how and why experts are questioning the reliability of India's GDP statistics:
Over the past few years, a growing number of economists and analysts have raised questions about India’s new gross domestic product (GDP) series. One of the key bones of the contention is related to the use of a new database on companies, MCA-21. Critics had pointed out that this database could include ghost firms that exist only on paper, and had demanded that the database be made public.
[...]Historically, the CSO relied on a sample survey conducted by the RBI to compute estimates for the corporate sector. The RBI sample consisted of only a few thousand companies, and hence the estimates were blown up (or multiplied) in proportion to the coverage of the paid up capital of the sample companies to the total number of companies registered with the ministry of company affairs (MCA).
This methodology was questioned, among others, by the Rangarajan Commission, which pointed out that the presence of a large number of fictitious or shell companies in the MCA records tended to lend an over-estimation bias in the GDP numbers.
Ahead of the base-year revision in 2015, a sub-committee appointed by the Advisory Committee on National Accounts (ACNAS) suggested the use of a new database, MCA-21, to construct the new GDP series. But instead of using the estimates generated from the database directly, as agreed upon by the sub-committee, the CSO scaled up even these estimates to account for non-reporting companies, which had declared returns in earlier years.
[...]The root of the problem was that no one really knew, or bothered to ascertain, the true size of the universe of genuine companies in India. Nor was any attempt made to verify the extent to which MCA-21 data was accurate, or to validate it using other databases (such as the Annual Survey of Industries, or ASI). As it turns out, NSSO field staff has now found that many companies reported to be “active" companies by the MCA are actually ghost companies that exist only on paper.
[...]There were other questions raised about the new methodology, including the use of formal sector indicators to estimate informal sector growth, such as using growth rates of the organized manufacturing industry to estimate growth for unorganized manufacturing. Others pointed to the potential mis-classification of industries, which meant that growth in one sector might well have been attributed to another. Still others argued that the use of inappropriate deflators tended to overstate the real GDP growth numbers, i.e., the GDP growth adjusted for inflation.
[...]“Our official statisticians know that the costs of under-estimating GDP growth are far higher than that of over-estimating," said one of the former NSC members cited above. “If the numbers are being jacked up, either because of depressed deflators, or any other reason, you are less likely to be questioned."Government says there is no impact of MCA-21 irregularities on GDP estimates.
“It is emphasised that there is no impact on the existing GDP/GVA estimates for the corporate sector as due care is taken to appropriately adjust the corporate filings at the aggregate level based on the paid up capital," the ministry of statistics and programme implementation (MoSPI) said on Thursday adding the data shortcomings are known.
“The issue of coverage, quality and timeliness of the MCA database vis-à-vis the Annual Survey of Industries had been discussed in detail in the various meetings of the Advisory Committee on National Accounts Statistics and adopted only thereafter,” it said pointing out that the methodologies followed for the 2011-12 series and also the back-series calculations are there in public domain.
