Reintegration of returning migrant workers

It was published in Pandemic Borders, Open Democracy, 16 March 2021.

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As COVID brings migrants home, how can Nepal reintegrate returning workers?

Money from overseas makes up a quarter of GDP, and the effects of the pandemic are putting a squeeze on an already struggling economy

For Nepal, like other developing countries that depend on migrant remittances, the COVID-19 pandemic has dealt a severe blow.

Money sent home by the thousands of Nepali migrant workers abroad amounts to about 25% of the country’s GDP, making it one of the most dependent countries on remittances in the world.

Reverse migration since the spread of COVID-19 has compounded unemployment problems in an already lockdown-battered economy. This means that timely and meaningful reintegration of the returning migrant workforce should be one of the top priorities, especially given that international travel and the global economy are not projected to fully recover any time soon.

Reverse migration

Since the lockdown started in March 2020, there has been a steady inflow of migrant workers returning to their home countries. Nepali migrant workers in India travelled by road, often walking for days to reach the border. Those in other countries were repatriated on special chartered flights operated by the government.

There is no official data on the exact number of migrant workers who have returned to Nepal since the lockdown, but in May the Nepal Association of Foreign Employment Agencies estimated that over half a million migrant workers wanted to return, especially from the Middle East and Malaysia.

The Nepali economy is facing a potential slowdown in remittance inflows. And while a 2018 labour force survey estimated unemployment at 11.4%, a more realistic number based on a broader measure of labour under-utilisation puts it as high as 39.3%. Amid a slowing economy, an influx of returning migrant workers will exacerbate unemployment even further.

Remittances have supported household consumption, propped up government finances (as revenue from imports financed by remittances alone account for 45% of total tax revenue), boosted banking sector liquidity and credit growth, increased household spending on healthcare and education, and helped to maintain external sector stability despite a ballooning trade deficit. All this means that the country will face a tough time reintegrating returning workers.

Reintegration

With the healthcare crisis requiring more public spending just to provide emergency relief, this severely curtails the country’s ability to effectively fund reintegration of returning migrant workers. The government estimated that it would need about $1bn just for employment programmes to deal with the impact of COVID-19.

A large gap between expenditure and revenue means that Nepal will need more international support to boost social protection-related spending in the next few years. Internally, it will have to reduce wasteful spending such as funding of pet projects, bailing out consistently underperforming state-owned enterprises, and non-targeted subsidies.

To enhance governance and targeting, it may be useful to use digital platforms to identify eligible beneficiaries of various government programmes and possibly transfer any cash handout directly to their bank accounts.

Another way to support returning migrants is to provide them with access to affordable credit to help those who are willing to start their own business ventures

In fact, there already exists social protection and public workfare programmes that can be better utilised to quickly engage returning migrant workers at the local level. For example, the Prime Minister Employment Program, which guarantees a maximum of 100 days of employment at subsistence wage, has been severely under-utilised so far. From July 2020, until March 3 this year, it provided an average of six days of work for 25,852 people out of 743,512 listed unemployed people in its roster.

The programme was launched in early 2019 to reduce youth dependency on overseas jobs and to create job opportunities within the country itself. Ramping up this programme with adequate budgeting and targeting could be beneficial in the short term to employ returning migrant workers.

Unfortunately, a fallout of the ineffectiveness of this programme was that many migrant workers who returned home are again actively pursuing job opportunities overseas. For instance, by September 2020, there were long queues of migrant workers at the Indian border points waiting for an opportunity to enter India for employment.

Technical and vocational education and certification could be another option for reintegrating migrants who are willing to enhance their skills and perhaps change profession. This could be done in partnership between government and businesses.

Another way to support returning migrants is to provide them with access to affordable credit to help those who are willing to start their own business ventures. Programmes such as Youth and Small Entrepreneurs Self-Employment Fund are set up to subsidise interest on loans for self-employment, and could be used for this.

The fund has not been as effective as expected largely owing to politicisation, a high interest burden even after subsidy, and approval hassles. Since its launch a decade ago, there are just 72,789 recipients, including 6,500 between July 2019 and July 2020. The central bank has also launched a scheme to issue subsidised loans at 5% interest to returnee migrant workers, among others. However, the uptake has been slow.

Successful reintegration would not be possible without accelerated economic growth as domestic employment opportunities will remain constrained, contributing to the “push factor” for outmigration which compel folks to migrate overseas for employment and safety.

Short-term economic stabilisation measures followed by structural reforms to ensure sustained and inclusive economic growth are required. In this process, more digitalisation, better targeting and, most importantly, sound governance will be vital.

Economic contraction in Nepal

It was published in The Kathmandu Post, 12 March 2021. An earlier blog post on the same issue here.

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We are witnessing an economic contraction

Revised and rebased statistics provide a more accurate picture of the economy.

The latest release of national accounts statistics—which generally refers to data pertaining to the value of economic activities computed using output, expenditure and income-based methods—by the Central Bureau of Statistics (CBS) is a welcome development. The rebased national account statistics, at 2010-11 prices, depicts a more accurate picture of economic activities, particularly the size of the economy and sectoral shifts in value-added economic activities or structural changes.

It shows that although the size of the economy increased to about US$35 billion, an upward revision by US$1.5 billion, gross domestic product likely contracted by 1.9 percent in the fiscal year 2019-20. The revised data also reveals that economic performance was weak even before the health, economic and livelihood mayhem created by the pandemic. The statistical bureau now needs to release back a series of national accounts statistics using the 2010-11 base so that comparative analysis and sectoral changes based on historical data can be appropriately construed.

Revised and rebased

Rebasing typically includes expanding coverage of economic activities, adding new or disaggregated sectors or changing the methodology used to measure economic activities so that they better reflect structural changes. For instance, the earlier industry sector comprised of four subsectors, but is now expanded to five subsectors by disaggregating electricity, gas and water into electricity, gas, steam and air conditioning supply; and water supply, sewerage and waste management. This facilitates tracking progress separately for the electricity and water supply subsectors—both of which are expected to add large capacities in the coming years.

The services sector has gone through the most changes, particularly inclusion or expansion of new economic activities. Transport, storage and communications activities are divided into two subsectors: transport and storage, and information and communication. Real estate, renting and business activities are divided into three subsectors. These and other changes have increased subsectors within the services sector to twelve, up from eight earlier.

The new data series is consistent with the international standard industrial classification of all economic activities (rev.4) and the system of national accounts 2008, which is the latest version of the international statistical standard for national accounts adopted by the United Nations Statistical Commission.

Using the old methodology and 2000-01 as the base year, and assuming early resumption of economic activities, the CBS estimated, in April 2020, that the GDP could grow by 2.3 percent. The government interpreted this as confirmation of the effectiveness of countercyclical fiscal and monetary measures rolled out to address the crisis. However, the latest revised data with the new 2010-11 base year reveals a completely contrasting picture: the economy will actually contract by 1.9 percent, thanks to a severe slump in industrial and services activities.

The agriculture sector is expected to grow by 2.2 percent, down from 5.2 percent in 2018-19, owing to a delayed monsoon, shortage of chemical fertilisers, use of substandard seeds and a fall armyworm invasion. The lockdowns also disrupted agricultural labour, harvest and supplies. Industrial output is projected to contract by 4.2 percent, down from 7.4 percent growth in 2018-19, as mining and quarrying, manufacturing, and construction activities were battered by subdued demand and lockdowns. Services output is projected to contract by 3.6 percent, down from 6.8 percent growth in 2018-19, owing to the severe impact of lockdowns and supplies disruptions on wholesale and retail trade, transportation and storage and accommodation and food service activities. These are high contact services activities, which together account for about 22 percent of GDP.

Importantly, the latest data captures the structural changes in the decade between rebasing. Between 2000-01 and 2010-11, the share of agriculture and industry sectors declined, but the services sector increased. This unusual structural change bypassed the industry sector, whose share in GDP declined to 14.7 in 2010-11 under the new base, down from 15.5 percent in the case of the old base. Last year it was barely 15.4 percent of GDP, almost the same as the wholesale, trade and repair subsector. Meanwhile, the data reveal a higher consumption level than earlier reported (91 percent of GDP), but lower investment, exports and imports.

The latest data release also changes the perception about some macroeconomic indicators. For instance, as a share of GDP, tax revenue, net domestic borrowing, outstanding public debt, money supply, exports, imports and remittances, among others, are now lower than previously estimated. These will be further revised when CBS releases actual figures next year.

Weak foundation

The data confirms that the economy was already performing poorly before the pandemic hit Nepal. Growth reached 9 percent in 2016-17 due to base effect, which refers to the tendency of achieving an arithmetically high rate of growth when starting from a very low base, and then started to decline steadily. It happened despite propping up consumption and investment through massive post-earthquake reconstruction efforts and national and subnational elections. The much-touted benefits of a stable government and expedited approval of investment laws and policies did not yield much of a result. The claim of creating a solid foundation for high economic growth (about double-digit annual average) and prosperity is losing steam. Political instability, bureaucratic hassles, bad governance, and low capital spending continue to affect private sector investment and growth momentum.

The CBS also released quarterly data which shows that the economy contracted by 15.4 percent in the fourth quarter of 2019-20 (mid-May to mid-July 2020) and by a further 4.6 percent in the first quarter of 2020-21 (mid-August 2020 to mid-October 2020). This points to the severe impact of lockdowns on high contact industry and services activities. Given that some services sector activities continue to remain affected throughout 2020-21 and the shortage of chemical fertilisers is affecting agricultural output, there is less likelihood of a sharp recovery in 2020-21 despite commendable progress in vaccination.

It is important for the bureau to release back series national accounts data that are consistent with the new base year. Additionally, the statistics bureau needs to release quarterly data for all sectors dating back to at least 2010-11. This is crucial to determine the historical trend and conduct a comparative analysis of sectoral composition and determinants of growth. Let us hope that CBS will publicise the full series data in its next release of preliminary growth estimates at the end of next month.

Fiscal and debt paradigm in India

In its report for 2021-26, the 15th Finance Commission of India states that public debt as a share of GDP should continue to serve as the medium-term anchor for fiscal policy in India despite the spending pressures created by the pandemic and investment needs during the recovery phase. Fiscal deficit should be the operational target as recommended by FRBM Act 2003 (amended in 2018). A rule-based framework is credible and transparent, but it must be flexible as well to avoid fragility, states the FC's report. 

It argues that extraordinary times like these require growth and income support measures that will unavoidably put upward pressure on public finances. The Commission expects positive interest-growth differentials and adverse debt dynamics over the next two to three years. However, it recommends fiscal consolidation and a declining trajectory for total public debt as a share of GDP over the medium-term. 

The FC forecasts fiscal deficit of the union government to be between 3.5% and 4.5% of GDP in FY2026, declining from a range of 6.0% and 6.5% of GDP in FY2022. Given the uncertainties and risks, the Commission outlined fiscal deficit under three scenarios: (i) economy recovery is slower than assessed, (ii) macro-economic assessment holds, and (iii) economic recovery is faster than assessed. In all cases, fiscal deficit is to decrease by 0.5 percentage point of GDP each successive year. It assumes a gradual return to a trend of real GDP growth of around 7% and a less severe than feared effect on workers and businesses due to the pandemic. 

For the States, the Commission recommends three options to allow for greater flexibility: (i) additional unconditional borrowing for the first two years to compensate for the loss of tax revenue; (ii) additional borrowing of 0.5 percentage of GSDP in case they meet the criteria for power sector reforms; and (iii) allowing the States to utilize any unutilized borrowing space in the subsequent years within the award period. If the States use the full borrowing space available, then the fiscal deficit, as a share of GSDP, is forecast at 4.5% for FY2022, 4% for FY2023, 3.5% for FY2024 and FY2025, and 3% for FY2026. If the States limit borrowing, on an average, to FRBM threshold, then it will be 3% of GSDP throughout. 

Overall, the Commission projects general government fiscal deficit to decline to 9.3% of GDP in FY2022 from 11.6% of GDP in FY2021 and then gradually decrease to 6.8% of GDP in FY2026. The Commission states that it is providing higher fiscal room to both the Center and States to be able to deal with the current pandemic and then the expected economic recovery. 

On outstanding general government debt, the Commission expects it to gradually decrease to 85.7% of GDP by FY2026 from a high of 89.8% of GDP in FY2021. The center’s public debt is expected to be 56.6% of GDP by FY2026. Given the prospect of increased borrowing by both the Union and State governments due to large expenditure needs (State government’s expenditure as a share of GDP is greater than that of the Union) in the short-term, there has to be a medium-term debt consolidation effort to ensure a sustainable debt to GDP ratio. Given that the Center’s outstanding public debt will be over 40% of GDP (general government debt 60% of GDP) and fiscal deficit above 3% of GDP for the foreseeable future, the FRBM Act needs to be amended again. 

It recommends additional expenditure be used not only to boost investment, but also to strengthen fundamentals to seize new opportunities such as the likely relocation of global production to India, and remote work setting in a distributed economic geography rather than continued growth of the largest cities. The commission prioritizes investment in human capital (especially health and education) and climate change and environmental risks such as air pollution. 

The Commission recommended vertical devolution of 41% of resources. For horizontal sharing/allocation of resources, it recommends 15% weight to population, 15% for area, 10% for forest & ecology cover, 45% for income distance, 2.5% for tax & fiscal efforts, and 12.5% for demographic performance. 

For revenue deficit grants, a type of grants-in-aid, the Commission recommends an allocation of 1.92% of gross revenue receipts of the Union government. Besides this, there are other performance-based grants-in-aid for sectors such as social sector (health and education sectors focusing on large and particularly vulnerable subset of the population), rural economy (agriculture and maintenance of rural roads), and governance and administrative reforms (judiciary, statistics, and aspirational districts and blocks). 

The Commission also estimated that structural ‘tax gap’ for India is over 5% of GDP. It recommends a series of operational and policy reforms to bridge the tax gap such as correcting the inverted duty structure in GST, addressing IT system deficiencies for GST, facilitating complete invoice matching, and reviewing exemptions, thresholds and concessions in income tax. 

It argues that India’s fiscal architecture needs to have three mutually reinforcing pillars: (i) fiscal rules that set institutional and budgetary framework for fiscal sustainability; (ii) consistent, reliable, and timely reporting of fiscal indicators; and (iii) ability of fiscal institution to conduct independent assessment to facilitate the first two pillars. This calls for restructuring the FRBM architecture, and constitution of a high-powered inter-governmental group to chart out a new fiscal consolidation framework.  

The Finance Commission provides recommendations to the President of India on the distribution of net proceeds of taxes between Center and the States, determination of factors and magnitude governing grants-in-aid to the States, and sound public finance, among others. They operate under a TOR that is different for every Commission and have a tenure of five years. 

Monetary framework matter in low income countries

Abstract from a new NBER working paper on if monetary policy framework in maintaining price and macroeconomic stability matter in low income countries, which exhibit high frequency of price adjustment (rather than monetary neutrality):

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Microeconomic evidence indicates a very high frequency of price adjustment in low income countries (LICs), raising the question of whether LICs may be reasonably characterized as exhibiting monetary neutrality. To address this question, we analyze a cross-country panel dataset of 79 LICs over the period 1990 to 2015 to assess the impact of external shocks on real GDP growth, and we find highly significant differences between LICs where the central bank targets monetary aggregates or inflation compared to LICs that maintain rigid nominal exchange rates. We also conduct an event study of the surprise devaluation of the Central African Franc (CFA) in January 1994 and find that it had highly significant effects on the output growth of 10 CFA countries relative to 18 similar countries outside the CFA zone. Consequently, the hypothesis of monetary neutrality is decisively rejected, and these findings provide strong support for the role of monetary policy frameworks in fostering price stability and macroeconomic stability in LICs.

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CBS projects Nepal's GDP to contract by 1.9% in FY2020 (using new base, FY2011=100)

On 4 March 2021, Nepal’s Central Bureau of Statistics released national accounts statistics that were rebased to 2010/11 (FY2011) from earlier 2000/01. According to the latest rebased national accounts statistics, the size of economy was about USD 34 billion in FY2020 (USD 32.4 billion without latest rebasing). Likewise, the new base yields nominal GVA 5% higher than nominal GVA under the old base. In FY2011, the rebased GDP was USD 21.6 billion, which is 14.3% higher than USD 18.9 billion under the old base. Since the nominal GDP is now going to be larger than in the previous FY2001 base series, several statistics related to fiscal, monetary and external sectors that are expressed as a share of GDP could see slight downward revision. FYI, fiscal year (FY) starts from mid-July of t-1 year and ends on mid-July of t year (for instance, FY2020 refers to the period between mid-July 2019 and mid-July 2020). 

The use of new base (FY2011=100) has yielded different GDP growth estimates. The CBS has released data spanning FY2011-FY2020. The last two years are revised and provisional estimates. So, these will be revised next year too. For now, GDP is estimated to contract by 1.9% in FY2020 (FY2001=100 base showed it would have grown by 2.3%) as the impact of COVID-19 disrupted labor, capital, supply chains and healthcare services, resulting in employment losses and business disruptions. A country-wise lockdown in Nepal started on 24 March 2020 (which is towards the end of second month of third quarter) and lasted well into the fourth quarter. Lockdown was relaxed in September. The country did not fully open at least until the end of 2020 (international travel remains restricted though). 

Agricultural sector is expected to grow at 2.2%, down from 5.2% in FY2019, owing to delayed monsoon, shortage of chemical fertilizers, use of substandard seeds, and an armyworm invasion. The lockdowns disrupted agricultural labor, harvest and supplies too. This, however, is the only silver lining as the other two sectors are expected to contract. In an op-ed published in The Kathmandu Post on 19 October 2020, I argued that GDP in FY2020 will contract.

Industrial output is projected to contract by 4.2%, down from 7.4% growth in FY2019, as mining and quarrying, manufacturing, and construction activities were battered by the lockdowns and subdued demand. However, with the addition of new hydroelectricity in the national grid and improvements in water supply, electricity and utilities subsector is expected to grow by 25.6%. 

Services output is projected to contract by 3.6%, down from 6.8% growth in FY2019 owing to the severe impact of lockdowns and supplies disruptions on wholesale and retail trade, transportation and storage and accommodation and food service activities.  These are high contact services activities. They together account for about 22% of GDP. Within services sector, public administration and defence, and mandatory social security payments are expected to grow at a rate higher than in FY2019. This reflects the increased government expenditure to support various temporary relief and income support measures for those affected by the pandemic. 

In the chart above also, notice that GDP growth reached a high of 9% in FY2017 as economic activities rebounded (plus some base effect) after the devastating 2015 earthquakes and 2016 border blockade. 

On the expenditure side, while consumption is expected to grow at 4%, slightly lower than 5.8% in FY2019, investment and net exports are expected to contract. Investment (gross capital formation) is expected to decrease by 21.2%, largely contributed by a fall in private investment. Public gross fixed capital investment is expected to contract by 5.4%, continuing on a contractionary trend since FY2018 as public capital spending continues to fall short of budgeted amount. Private gross fixed investment is expected to contract by 2.8%, down from 20.8% growth in FY2019, as the lockdowns created adverse environment for private sector. A larger export contraction compared to import contraction is expected to lead to overall contraction of net exports.

Here are some observations regarding the rebasing of national account statistics.

First, rebasing is a welcome development given that it helps to capture some of the structural changes in an economy over a period of time. It often includes inclusion of more of existing, new or disaggregated sectors, which usually happen in services sector as it tends to change more with time. The latest FY2011 series also incorporates recommendation of UN SNA 2008 (in place of SNA 1993) and adopts updated industrial division classification. So, it is inching toward more data accuracy and consistency with international practices. This is the fifth rebasing of national accounts statistics, following rebasing in FY1965, FY1975, FY1985, FY1995, and FY2001. I hope the CBS releases national accounts statistics for years prior to FY2011 using the new base so that historical comparison is consistent.

The new base series includes 18 subsectors and is updated to international standards industrial classification (ISIC) rev.4. The old base series included 15 subsectors and was consistent with ISIC rev.3.1. The value of economic activities each year (GDP) under the new base is higher for three reasons: (i) wider coverage of economic activities all subsectors except public administration and defense and other services (arts, recreational, etc); (ii) changes due to methodology especially for financial intermediation, and real estate and professional activities; and (iii) change due to classification especially for real estate and professional activities, public administration and defense, and other services. Overall, changes due to methodology, and wider coverage and use of new ratios accounted for 0.48% and 13.58%, respectively, increase in GDP in FY2011 under the new base. 

Agriculture, forestry and fishing is now clubbed as one sector in the new series. In the industry sector, electricity, gas and water subsector is divided into two subsectors: electricity, gas, stream and air conditioning supply; and water supply, sewerage, waste management and remediation activities. So, the industry sector in the new base has five subsectors. Services sector is the one that has gone through most changes, particularly inclusion or expansion of new economic activities. Wholesale and retail trade now also has repair of motor vehicles and motorcycles. Hotels and restaurants subsector is now accommodation and food services activities. Transport, storage and communications is divided into two subsectors: transport and storage, and information and communication. Real estate, renting and business activities are now divided into three subsectors: real estate activities; professional, scientific, and technical activities; and administration and support service activities. 

Second, rebasing, to some extent, captures the structural changes in the decade between the rebasing. Between FY2001 and FY2011, the share of agriculture and industry sectors declined, but that of services sector increased. This confirms the unusual structural transformation whereby the decline in agriculture sector is picked up by the increase in services sector, bypassing the industrial sector. Moreover, the larger share of services sector is also due to wider coverage of economic activities and changes in methodology and classification. Even with this, wholesale and retail trade, and vehicular repair activities as a subsector accounts for about 15.2% of GDP, which is similar to the share of the entire industry sector (mining and quarrying; manufacturing; electricity, gas, steam and air conditioning; water supply, sewerage, and waste management; and construction). The massive post-earthquake reconstruction boosted mining and quarrying, and construction activities, leading to a slight uptick in the share of industry sector in GDP from FY2017 onwards. 

Third, rebasing increased the share of services sector in GDP and hence the severity of impact of the pandemic as well. The high contact services such as wholesale and retail trade, and repair activities; transportation and storage; and accommodation and food service activities were also the most affected by the lockdowns and social distancing norms. This contributed to the larger contraction of services sector in FY2020 and its eventual effect on GDP contraction.

Fourth, on the expenditure side, the rebasing exercise has reinforced the argument that consumption is higher than earlier reported. It is largely fueled by remittance income, which has drastically increased since FY2001. Investment, exports and imports were lower than expected. In FY2011, the share of consumption in GDP was 86% under old base but 92.9% under the new base. It increased to 91.1% of GDP in FY2020 under the new base with private consumption accounting for about 88% of total consumption. 

Gross capital formation, or investment in general terms, was markedly down in FY2011: 27.7% of GDP under new base compared to 38% of GDP under the old base. It increased to 31.3% of GDP in FY2020. Notice that under the old base investment was reported to be about 50.2% of GDP, but almost half of it was change in stocks, which is derived residually and hence includes statistical discrepancy/error as well. Under the new base, statistical discrepancy has been as high as 9.5% of GDP (in FY2018). It is estimated to be 4.6% of GDP in FY2020. Public investment is reported to be higher under the new base than under the old base but private investment is reported to be lower under the new base. Over years, while public investment, as a share of GDP, is declining (thanks to receding public capital spending absorptive capacity), private investment is increasing, reaching 23.9% of GDP in FY2020. 

Imports of goods and services are expected to be 28.4% of GDP under the new base as opposed to 32.9% of GDP under the old base in FY2011. Imports are expected to be 33.6% of GDP in FY2020 (under old base it was reported to be 40.1% of GDP). Exports of goods and services are expected to be about 6.7% of GDP in FY2020, down from 7.8% of GDP in FY2011. 

Fifth, using the new base gives a higher per capita GDP as GDP itself is revised upward. For instance, the value of goods and services produced in the country in FY2020 (or GDP) was USD 32.4 billion under the old base. It has increased to USD 33.9 billion under the new base, which means size of the economy increased by about USD 1.5 billion. Per capita GDP is now estimated to be USD 1134 and per capita GNI USD 1148 in FY2020. Per capita GNDI (which includes remittance inflows as well) was USD 1430 in FY2020 (or 126% of GDP). These are all in nominal terms. 

Since consumption is too high, gross domestic savings is automatically low. It dropped to 8.9% of GDP in FY2020 from 15.7% of GDP in FY2019. Gross national savings was about 35% of GDP in FY2020, down from 42.5% of GDP in FY2019. 

Sixth, since nominal GDP has increased, all other macro indicators expressed as a share of GDP have also been automatically revised downward. Tax revenue will be about 17.8% of GDP. There may not be much change in fiscal deficit as a share of GDP because expenditure will also be arithmetically lower. Current account deficit will now be around 0.8% of GDP. Merchandise exports and imports will be 2.7% and 29.7% of GDP, respectively in FY2020. Workers’ remittances would drop to around 22% of GDP in FY2020. Outstanding public debt in FY2020 was 36% of GDP (37.7% of GDP under the old base), up from 27.1% of GDP in FY2019.

Seventh, rebasing is a good exercise and needs to be done periodically. Let us hope that the CBS will publish national accounts estimates (both real and nominal) for years prior to FY2011 as well using the new base year. This is important to ensure correct comparison and interpretation. Creating a back series using the new base year is an important exercise for the statistics bureau. Otherwise, people will start reporting real GDP growth using old base year for up to FY2011 and then use the latest base year FY2011 onwards. 

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The CBS also released quarter data for up to the first quarter of FY2021. The economy contracted, y-o-y in the last quarter of FY2020 by 15.4% and then further contracted by 4.6% in the first quarter of FY2021. The impact of COVID-19 and the lockdowns on the economy is clearly visible from the slump in GDP numbers in the two quarters. This has technically pushed the economy into recession as two consecutive quarters of GDP contraction is usually referred to as recession. This quarterly series is also based on the new base. The CBS has not released full related sectoral data and the chart below is from the presentation slides CBS uploaded in its website..