The most talked about point in this Lok Sabha Elections is Economy. Prime Minister Narendra Modi, in his five-year term, has been criticised over not doing enough for the manufacturing sector and not creating enough jobs for millions of youth entering the jobs market every month. The BJP-led NDA government and the opposition parties are fighting over a set of numbers which is not just economic data but has the potential to be used as a potent weapon in the Lok Sabha elections.
The Indian economy appeared to be losing momentum in the build up to the Lok Sabha elections as a Reuters survey of economists forecast that GDP growth slipped to 6.9% annually in the October-December quarter (Q3).
If the Q3 GDP forecast proves accurate, India will post its slowest growth in five quarters, making it harder for Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) to persuade voters that government policies were delivering economic success.
So if the economy is falling how did the Modi government claim that GDP reached all time high last year? India’s economic growth under the previous Congress-led coalition government was slower than estimated earlier and was never in double digits, according to the revised GDP numbers released by the government.
The new GDP data, pertaining to the years between 2005-06 and 2011-12, has sparked off a heated exchange between the Congress and the ruling Bharatiya Janata Party over the performance of the economy during their respective terms.
With Lok Sabha elections under, the Narendra Modi-led National Democratic Alliance government is using the new data to claim that its management of the economy has been superior to that of the Congress-led United Progressive Alliance (UPA), as it seeks a second term.
According to the back-series data, the Indian economy grew at an average of 6.67% in the nine years (till 31 March 2014) when UPA was in power, slower than the 7.35% achieved in the four years (till 31 March 2018), with Modi as the Prime Minister. It also shows that the highest growth rate the Indian economy has so far achieved is 8.5% in 2010-11, against the 10.3% estimated using the older base.
So what exactly changed?
The Modi led-government issued revised GDP data for the 2005-12 fiscal years that lowered growth under the previous Congress-led UPA in contrast with recalculated numbers that had been released in August.
What is GDP?
Gross Domestic Product or GDP represents the total value of all the final goods and services that are produced within a country’s borders within a particular time period, typically a year or a quarter.
What is a “base year”?
The base year of the national accounts is chosen to enable inter-year comparisons. It gives an idea about changes in purchasing power and enables calculation of inflation-adjusted growth estimates.
The new series changes the base to 2011-12 from 2004-05. Every national accounts dataset gives GDP calculations for two years: 2011-12 and the current year.
The new base year
From January 2015, the Central Statistics Office (CSO) updated base year for GDP calculation to 2011-12, replacing the old series base year of 2004-05, as per the recommendations of the National Statistical Commission. Base year is carefully selected because of the impact it has on the numbers and the year chosen is usually one in which no serious anomaly was present. The new series includes corporate information from the MCA21 database of the Commerce and Industry.
What did it change?
The back series shows that GDP growth in the UPA years was slower with the peak of 10.3% in FY11 — now scaled back to 8.5%. According to the back series, the four years of the current government show higher average growth than that achieved during the UPA years. The average growth for the UPA years after the back-series revision for FY06 to FY12 declines to 6.82% from 7.75% earlier, well below the 7.35% clocked during the four years of the present government.
What is the government’s defence?
The government says that the numbers — which had bumped growth during the UPA regime — were not actual but experimental. It says the GDP back series issued by the Sudipto Mundle committee amounted to “experimental results” meant to facilitate a decision on the approach to be followed and were not official estimates. It says the back-series GDP data is the result of hard work of CSO officials who had recalibrated the growth figures and that these numbers were thoroughly vetted by leading economists before being made official. Refuting opposition’s charges that growth rate of UPA has been revised lower on the directions of the government, Finance Minister Arun Jaitley said today the CSO was a highly credible organisation and maintains arm’s length distance from Finance Ministry. “UPA had welcomed CSO decision when it revised FY13, FY14 GDP growth upwards. The same yardstick has been applied by CSO while revising growth downwards,” the finance minister said.