Split Wide Open

Of late, every estimate of India's economic growth in terms of gross domestic product (GDP) has resulted in heated debates and discussions. The latest figure released on May 31 by the Central Statistics Office (CSO) was no different. It said the country's GDP for 2015/16 grew 7.6 per cent over 2014/15 to touch Rs 113.5 lakh crore, with 2011/12 as the base year for computing the economic growth rate. Though the growth figure was in line with the Centre's expectations, it was received with much scepticism by many, both within the economist fraternity and outside.

Sceptics have been correlating GDP growth with other parameters, such as sluggish job growth, weak private investments, muted bank credit uptake and agrarian distress in large parts of India, to cast doubts over the growth numbers. Quality of the data and the methodology that India follows to calculate its GDP have also been questioned by them. Those defending the government numbers find the complaints too harsh and unfair and, hence, the debate.

It, however, would be incorrect to say that the naysayers are completely wrong because everything is not perfect with India's statistical system. At the same time, it would be grossly inaccurate to hatch a conspiracy theory. India's statistics department is not cooking up numbers, and perhaps is doing its best within the given limitations.

There are many gaps in our data collection system. While experts say our production data is okay, there is near-unanimous agreement on the fact that the quality of expenditure data lags behind. In other words, while theoretically the money you earned and the money you spent and invested should be the same, the data does not reflect the same level of accuracy. In fact, experts say, statistical discrepancy in the economic growth calculations has become a norm with most developing countries with thriving informal markets - more of a developing-country phenomenon, than an India-specific problem.

At the same time, one cannot find fault with the methodology that India follows. Over the past one year, it has started following an internationally agreed system of national accounts, or SNA, to calculate its economic growth. Further, this is not the first time we are hearing the term "jobless growth". It was often heard during the previous UPA regime. To be fair to India's statistical system, job growth and GDP have mostly not been in sync over the years.

The bulk of confusion regarding India's growth numbers happened after the country changed the base year for GDP calculations to 2011/12 from 2004/05 last year. Backcasting the new series GDP beyond the last two years to provide a uniform set of numbers for statistical comparison is what the government needs to do now. And, it is already on the job, but has been missing deadlines. Once the exercise is over, the debates over GDP growth numbers should settle down.