After much deliberations and sound technical analysis of methodology, Central Statistical Office (CSO) of India, has put out the ‘Back Series Data’ of National Accounts for the years between 2004-05 and 2011-12, on its website. This data helps in understanding various components of National Accounts like Gross Domestic Product (GDP), GDP growth rate and others on one base year, i.e. 2011-12. Consequently, this new series, which evidently shows the higher average GDP growth rate under the present government, has called out the bluff of many self-declared economists who derided the Modi Government for performing worse than the UPA Government.
Let us understand the whole issue in a chronological way.
- To bring the calculation of national accounts at par with the international standards, Government of India adopted a new methodology in January 2015.
- The government adopted the international practice of calculating the industry-wise estimates as Gross Value Added (GVA) at basic prices in the new series and ended the erstwhile system of calculating GDP at factor cost. It has also moved to a new base year of 2011-12 from the earlier base year of 2004-05.
- Change in the base year under the new methodology changed the GDP growth figures. The GDP growth rates arrived at by using 2011-12 as the base year were greater than the GDP growth rate calculated using the old series of the base year 2004-05, as shown below for the two years of the UPA II Government.
This was emphatically used by the Congress and other opposition parties to say that the UPA II Government was doing better than what was believed earlier.
- But, for the years before 2012, CSO was not able to release the new series of GDP statistics as per the new base year of 2011-12. The major reasons cited for this was the absence of data like MCA 21 database. This resulted in the unclear comparative picture of the two governments, that is UPA and NDA.
- National Statistical Commission (NSC), an autonomous body that helps India’s statistical agencies in the collection of data, had appointed a committee on Real Sector Statistics. This committee submitted its report in July 2018. In its report, various alternative approaches for converting the old GDP series (new back series of GDP for years between 2004-05 and 2011-12) were discussed.
- The above report was put in the public domain for feedback on the technical soundness of the methods used.
- The estimates of the old series of GDP adjusted to the new base year 2011-12 were also presented.
- Even when the final methodology was being worked upon and deliberations were going on, some of the so-called economists in India started attacking the present government for its ‘poor performance’ vis-à-vis the UPA Government on the basis of the estimates of this report. This was during the time when methodology was still not finalised by any government agency.
- Also, government by a press note had clarified that it is a ‘work in progress’ and Ministry of Statistics and Program Implementation will release the official GDP back series data soon.
- Finally, the official figures on GDP back series data were put in the public domain on November 28, 2018, and one of the graphs is presented below. This clearly shows that the Modi Government has done better than both the Manmohan Singh-led UPA I & II in terms of average GDP growth rate.
From the above graph, Average GDP Growth Rate can be calculated and compared. See the table below:
|Government||Average GDP Growth Rate|
|UPA I (avg. for 4 years)||6.7|
|UPA II (avg. for 5 years)||6.7|
|NDA (avg. for 4 years)||7.35|
The above graph and table clearly show that how the two governments have fared during their respective tenures. This comparison also needs to be seen in the light of a few important factors, such as:
- Shift from NDA I to UPA I (2004-05) – The economy that the Manmohan Singh Government had inherited from the Vajpayee-led NDA was already on a high growth trajectory, with GDP growth rate nearing around 8%. It was due to this that the Congress Government was able to maintain a high growth until 2008-09 before the global recession had hit the economy.
- Shift from UPA I to UPA II (2009-10) – UPA was not able to maintain the GDP growth rate in its second tenure despite the fact that there was not much impact of the recession on India due to the strong banking and economic base of the country, as also explained by experts. Low GDP growth rate can be seen in the graph above. Even the growth of 8.5% in the new series in the year 2010-11 (which was around 10% in the old series) was on the back of the fiscal stimulus given by the Manmohan Singh Government in the backdrop of the global recession. This fiscal stimulus had boosted the economy but as the year passed the growth rate again started hovering between 5.2% and 6.4%.
- Shift from UPA II to NDA II (2014-15) – When the Modi Government took over the charge, the economy of India was not doing very well. The GDP growth rate was around 6.4% in 2013-14. There was a Non-Performing Assets crisis looming large over the country, which means banks were stressed which checked the credit expansion and thus the economic growth of the country. Also, the issues of corruption and black money during UPA II were well noted. Thus, Prime Minister Narendra Modi brought in structural reforms like Demonetisation and GST. Despite these reforms, the Modi Government has been able to maintain the higher GDP growth rate.
Therefore, the UPA II witnessed an era of corruption and low GDP growth rate with no structural changes but the Modi Government has seen a higher GDP growth rate with cleaner governance and structural reforms.
The above analysis explains most of the events that have unfolded ever since the government has adopted a new methodology to estimate the National Accounts like GDP and GDP growth rate. Recently released new series clears the smoke around the GDP data and GDP growth rate under both the governments with a methodology that is now based on international standards.