Understanding the New GDP numbers

The central statistical organization (CSO) revelation, revising the GDP estimates with the new base year raises many questions because of mis-matching ground realities. The GDP growth figures for the past few years were estimated on 2004-05 as base year at constant price. The change in the base year from 2004-05 to 2011-12 changed the whole dynamics of growth numbers, at the same time raised many questions against the jump, in a policy paralyzed situations.

What are the changes brought?

Base year revised from 2004-05 to 2011-12. The constant price factor is now shifted to market price, which is in line with global practice. A CSO estimate now includes informal sector and various unincorporated sectors. Segregating crop and livestock production, value addition to the extraction of sand through an indirect method in accordance with its use in construction. Inclusion of stock brokers account etc, are some of the changes.

Changed growth/ GDP figures

If 2004-05 is the old series then 2011-12 termed as new series. The GDP estimates in 2012-13 as of old series was 4.7 which are revised to 5.1 in the new series. The GDP estimates for 2013-14 according to old series was 5.0 which are revised to 7.4 as of the new series. The GDP share of manufacturing changed from 15% to 18%, agriculture share increased to 17% from 14%. The service sector share comes down to around 54% which was 60-65% as of the old series estimates.

Contradicting figures

The fundamental problem is that the macroeconomic indicators did not connect well with the ground reality, be it the IIP (index for industrial production), credit growth, company earnings and the non-performing assets. The CSO argues the inclusion of unincorporated sector introduce the swing factor. If it is so then the constant RBI’s pitching that the small scale industry contributes majorly to the non-performing assets, do not comes in consonance with the swing. On one hand the inclusion of small scale industries are raising GDP numbers and on the other are responsible for the non-performing assets of banks brings the contradiction.

Imports actually declined last year, company’s profit did not reflect the high growth in 2013-14. Private investment and credit off take remained slack and mounting bank assets with the banks. The manufacturing sector for instance shows a growth rate of 6% in 2013-14, as compared to -0.7% in the old series estimates.

It would be naïve and political show and flaunt the GDP numbers as victory of the new government. The real problems with the growth numbers remain intact instead of the revision. Manufacturing growth, infrastructure, employment generation, agriculture growth, increasing inequality are the various sector that still needs to grow and show results with the course of the financial year.