UPA, NDA SPAR OVER GDP DATA
Anew report on GDP growth for years prior to 201112, calculated using a methodology introduced after the NDA government came to power, has stirred a hornets’ nest. The report, published on the statistics and programme implementation ministry’s website on July 25 and prepared by a government-backed panel led by economist Sudipto Mundle, says India grew at an average 8 per cent under the UPA regime led by Manmohan Singh. GDP growth touched a record 10.8 per cent in 2010-11. Without doubt, this was a major embarrassment for the Narendra Modi government as it blunted its argument of the economy stuttering under the previous government. The Modi government changed the method of assessing GDP January 2015 onwards, broadening the definition of manufacturing to include manufacturing services and giving more weight to the balancesheet data drawn from companies rather than the IIP (Index of Industrial Production) data. This helped boost the official GDP numbers, with the economy recording 7.3 per cent average GDP growth during the Modi government’s first four years. The government, however, remained silent on a similar extrapolation of data to assess GDP during the UPA years.
No surprises, then, that the latest report was taken off the reports section in the ministry’s website and reportedly posted in the ‘draft reports’ section of the National Statistical Commission. An introduction to the ‘draft’ report said, “The committees constituted by the National Statistical Commission have submitted draft reports for wider public consultation. These reports are not final and the figures/estimates are also not final and should not be quoted anywhere.”
But the damage was done. The Congress said its position stood vindicated. “Truth has triumphed,” former Union minister P. Chidambaram said. “The back series calculation of GDP has proved that the best years of economic growth were the UPA years 2004-2014...I wish the Modi government well in its fifth year. It can never catch up with UPA-I (the first five years of the Manmohan government), but I wish it catches up with UPA-II,” he said.
The BJP went on the offensive. In a Facebook blog, Union minister Arun Jaitley said India grew “at a high rate” between 2003 and 2008 thanks to the work of the outgoing Vajpayee government, “continuous incremental reforms from 1991 to 2004”, growing exports and conducive global tailwinds.
Experts say the new set of numbers does not throw up any surprises. “People have been waiting for the back series data, and it has taken some time,” said D.K. Joshi, chief economist with Crisil. “But there is no surprise element in it.” The first term of the UPA government benefited from the fast growing world economy, which spurred global trade, and higher demand for goods and services, aiding countries such as India. Although growth fell after the 2008 Lehman Brothers bankruptcy crisis in the US, it picked up on higher government stimulus and low interest rates. “This is the period of the 10 per cent growth under the new series,” says Joshi. This period was followed by one marked by miscalculated investments, leading to projects getting stuck and bad loans rising. Although the new government that assumed power in May 2014 benefited from low oil prices in the initial years, inflation targeting and a stress on fiscal discipline slowed down growth. Demonetisation and the implementation of GST put the economy under further stress. However, the economy is poised to grow at 7.2 per cent in the current fiscal, adds Joshi.
Revision of base year is an activity that needs to be taken up regularly, say experts. Only then can GDP numbers capture all activity, including disruptions caused by the rapidly changing digital economy. Going by that count and the fact that nominal GDP growth in the ‘common year’ of 2011-12 was more or less similar in both the new and the old series, the row over the new report is more about managing the optics and the political fallout than anything substantial. ■