It’s official now. The government-initiated recalibration of the economy for the years 2004-05 to 2011-12, based on the new base year 2011-12, paints a somewhat less cheerful picture on the GDP growth front for these years.

However, the new methodology of changed base year (2011-12) with the latest data sources and improved coverage has bumped up the economy’s size in these eight years, resulting in a statistical effect of lowering GDP growth rates, say economy watchers.

One of the key takeaways from the back series estimates for 2004-05 to 2011-12 — released by the Central Statistics Office (CSO) here on Wednesday — is that GDP growth rates for these years under the earlier 2004-05 base year was “uniformly lower” than those in the new base year of 2011-12.

Part of the reason is that a change in base year to 2011-12 means increase in output levels (at constant prices) due to increased prices under the new base year.

Simply put, a plain comparison — although neither desirable nor ideal — of the two series (2011-12 vis-à-vis 2004-05) showed that GDP growth rates under the old series (2004-05) may have been overstated.

This lower GDP growth rate trend was evident in each of the years from 2004-05 to 2011-12. Interestingly, the maximum GDP growth rate recorded in these years under the back series estimate for 2004-05 to 2011-12 was 8.5 per cent in 2010-11, much lower than the 10.3 per cent growth rate recorded under the previous base year 2004-05.

The CSO’s 2011-12 back series computation on latest data sets, after factoring in the UN System of National Accounts (SNA-2008), demolishes the notion in several quarters that the Indian economy was entirely insulated from the global financial crisis in 2008-09, said economy watchers.

As against the earlier estimated GDP growth of 3.9 per cent in 2008-09, the Indian economy had only grown 3.1 per cent in that year, the latest back series data released on Wednesday revealed.

Also, the widespread belief that India’s economic growth had a “golden” run between 2005-06 and 2007-08 is somewhat diluted going by the latest recalibrated growth rates for these years.

As against the earlier estimated growth rates of 9.3 per cent (2005-06), 9.3 per cent (2006-07) and 9.8 per cent( 2007-08), the GDP print for these years under the back series came in at 7.9 per cent, 8.1 per cent and 7.7 per cent respectively.

Cautionary note

Releasing the back series estimates for 2004-05 to 2011-12 here on Wednesday, both Rajiv Kumar, Vice-Chairman, NITI Aayog, and Pravin Srivastava, Chief Statistician of India, asserted that it would not be correct to compare the economic growth rates under the different base years.

The new series was a far more superior one, said Kumar. “We have brought methodological improvements under the new series 2011-12. I want to dispel all fears of methodological weakness in the latest methodology used by us in this back series computation,” he added.

Interestingly, for this exercise, the CSO has not considered the controversial report of the sub-committee of the National Statistics Commission. It has not been finally accepted, it is learnt.

Madan Sabnavis, Chief Economist , CARE Ratings, told BusinessLine the revised back series that was presented does indicate that the pre-2012-13 period had registered lower growth rates under the new globally accepted methodology. “This also means that several inferences we drew about growth in that era were based on numbers which were overstated by the earlier methodology,” he said.

Devendra Pant, Chief Economist and Head-Public Finance, India Ratings, had a slightly different take on the latest CSO data release. “Since the GDP is now measured at 2011-12 prices instead of 2004-05 prices, an increase in the size of the economy in real terms is a pure statistical phenomenon, which has resulted in lower GDP growth at FY12 prices as compared to FY05 prices,” he said

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