Better Reflection of Economy: FM Jaitley Writes on New GDP Formula

Arun Jaitley.

(File Photo: IANS)

The CSO, in the year 2015, changed the way of calculating Gross Domestic Product (GDP). GDP growth rate estimates were revised from the year 2012-13 onwards with 2011-12 being the base year. Since then, every quarter and annually, GDP data is released on that basis. The immediate impact of the revision based on the new GDP series was on the last two years of the UPA government.

For the year 2012-13 the growth rate was revised from 4.7% to 5.1% and later again to 5.5%. Similarly, for 2013-14 the GDP growth rate was revised from 5% to 6.9% and later revised to 6.4%.

WHAT THE UPA SAID IN 2015

Once the new GDP estimates were given, my predecessor Shri P Chidambaram publicly welcomed the new series. He said “the new data successfully establishes the fact that UPA succeeded to revive the economy. The revised GDP data will end misconceived charges that UPA mismanaged the economy” (3rd February, 2015).

THE BASIS OF NEW SERIES

The new series is more broad-based and is a better reflection of the Indian economy. It is globally more comparable. Most experts, including those who have headed the CSO, have opined that this better represents the real state of the Indian economy. Obviously, when the new series is in place, it has to be used as a basis for backward revision. So what was revised from the year 2011-12 onwards is now being revised from 2004-05. Consequently, the same basis which improved the growth estimate in the last two years of the UPA Government somewhat downgraded it in the earlier years.

Those who took after the new series in 2015 now consider the new series to be a “hatched job” and a “bad joke”. What humours some when data shows an upward trend depresses them if it moves in the reverse direction.

The Congress party’s reaction is given by those who perhaps have a nodding acquaintance with the subject. Data based on facts and on the best global practices is rejected by the party because it takes away the last of its surviving arguments “my GDP growth was higher than yours”.

The CSO under various hovernments has always functioned objectively. It maintains an arms length distance from the finance ministry. North Block becomes aware of the final figures only when they are released. It is an organisation that has global credibility. No one in India has ever imputed motives to the CSO. The sooner the Congress party realises that its policy paralysis pushed India into the Fragile 5, the better it will be for the party and its leadership.

(The article was originally posted on Arun Jaitley’s Facebook page)