“There is no reason to disbelieve what the back series data reflects,” says Rajiv Kumar, Vice-Chairman, NITI Aayog. No sooner than the Central Statistics Office (CSO) released the back series data last week, Kumar was flooded with a volley of questions, including NITI Aayog’s involvement in the whole exercise. In conversation with BusinessLine, Kumar said, “We should not miss the big picture. The need is to adopt international best practices — these are all technical changes and nothing arbitrary. Let us not politicise it.” Excerpts from an interview:
Questions are being raised on involvement of NITI Aayog…
I really don’t understand what this fuss is all about. The Department of Statistics was once a part of the Planning Commission. Have people forgotten that? Besides, NITI Aayog is an organisation that uses data a lot.
GDP at constant prices seems to have been brought down in the back series…
It has come down is the better way of saying. Statisticians working at CSO and even outside explained to us that services sector data had been overestimated in the previous series that has 2004-05 as base. For example, there were trade-related services — relating to a particular commodity like iron ore. Iron ore during 2004-05 to 2011-12 saw huge growth and changes. Services related to iron ore were also extrapolated at the same growth rate. Although the share of these services was small, they were grossly inflated. In the services sector as a whole, the growth was inflated.
The CSO felt “this is not right” and there was a need to better estimate trade-related services. Another example is the construction sector; when it went through a boom, the sector saw all services like architecture, engineers, associated with construction, being extrapolated at the same growth rate. This was an overestimate.
In case of financial services, the United Nations System of National Accounts (SNA-2008) says that the central banks’ (here, the RBI) profit/loss should be counted differently — its banking division should be treated as a non-market activity. So if you drop that suddenly, the financial services level also reports a dip.
Similarly, in telecom, the earlier series used the growth in the number of mobile users (subscribers) to measure the growth. Now, the CSO has switched over to the minutes of data usage, which is a more realistic estimate. But it brings down growth. In the three sectors — financial services, informal trade and telecommunications — decline was evident. This brought down the growth of the services sectors and therefore its share. This is the entire story.
How far has this series managed to cover informal trade?
For informal trade, something called the General Trade Index estimated on the basis of a 1993 survey was being used and extrapolated on the growth in output — which is not same as trade. So what it has now done is to use sales tax data to estimate the growth rate of informal trade.
What is a grey area in this back series?
Manufacturing. For this sector, beyond 2010-11, the Ministry for Corporate Affairs data was not available. So it had to rely on Annual Survey of Industries data, which may well be a much smaller sample. But despite the constraint, it has tried to work on it.
A similar exercise was undertaken by the National Statistical Commission (NSC) committee. What happened to its report?
The committee was never meant to do this. It is not even official. The Commission was mandated to improve collection and analysis for real-sector statistics. It came out with a report giving estimates of the back series of GDP/GVA with 2011-12 as base, using product shift approach to prepare estimates in current prices and then applying a price deflator on each estimate to arrive at a constant price estimate for the back series. This is not as per the methodology recommended by SNA 2008, which recommends volume extrapolation as a preferred methodology for constant price estimates over price deflation.
What makes the method adopted for back series superior to the previous ones or the product shift approach?
To understand why it is better, you must know that the level estimates of GDP at current prices between the 2004-05 series and the 2011-12 series in the base year 2011-12 were different by about ₹3 lakh crore, as released by the Ministry of Statistics and Programme Implementation (MoSPI). This difference was adjusted uniformly by the NSC committee over 18 years between 1993-94 and 2011-12, assuming that the structural changes in the economy were gradual. The estimates at the level of each broad industry group were taken separately and then added to arrive at the current price estimate for each intervening year.
Though the method adopted by the NSC committee was simple, it was an academic exercise that had limitations and did not represent the sectoral changes in the intervening period, essentially required to be captured using new methodology and data sources.
In the approach followed by MoSPI, the latest data sources like sales tax, new series WPI and CPI and new methodologies have been used for preparing the estimates of GDP for the back series, as was done in the new series at the sectoral and sub-sectoral levels, both in the current and constant price series.
What has the CSO used to arrive at the constant price estimate?
The CSO has used volume extrapolation method for some sectors, sector-specific price deflators for some, and revaluation using base year price and year-wise quantity for others. The methodology used by CSO is in accordance with UN SNA 2008 recommendations.
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