Solving the GDP Puzzle

D.K. Joshi, Senior Director and Chief Economist, CRISIL

This is an advance estimate and advance estimates are subject to revisions - usually two-three revisions. After this, we will see revised estimates and then final estimates, as more information about the year is available. This is based on the first set of numbers.

Informal/unorganised sectors have not been captured well in the first estimate. So, an over-estimation is possible to some extent, as the data have not captured the part that was possibly impacted more by demonetisation. So, my sense is that we can see the estimates getting revised downwards. However, I dont see a substantial downward revision. For example, the consensus was that the third-quarter number will come down to 6 per cent, but advanced estimates show it at 7 per cent.

The second message you can derive from this number is that growth has been supported largely by government expenditure.

The third is that the impact of demonetisation has not been long lasting. The dent was not that significant, at least according to this set of data.

What kind of revision do you expect?

In this environment, it is difficult to predict. Our outlook for this year is 6.9 per cent and not 7.1 per cent. The Economic Survey pegs it at 6.6 per cent. So, there are various estimates, but one thing is clear - demonetisation has not been catastrophic as expected.

Pronab Sen, Economist and Former Chief Statistician of India

The advance numbers are completely off-the-mark, but on expected lines. I have said this earlier also - that quarterly GDP numbers are based on organised sector data and do not reflect the informal sector, which has been impacted the most by demonetisation. The revised data may be more accurate but come later.

The informal sector is captured on the assumption that it reflects the organised sector. However, the size of organised and unorganised sectors in a particular industry may differ. In certain sectors, the organised space is larger than the unorganised space and vice versa, but the growth rate applied in both is the same. There is no direct measure only for the informal sector, except the employment data. The only real measure of the informal sector is the CSSO data, which comes after three-four years.

N.R. Bhanumurthy, Professor, National Institute of Public Finance and Policy