The Centre will soon revise the way it measures the gross domestic product to reflect under-represented and informal economic sectors, two government sources said, in an initiative that is expected to show the economy is larger than previously thought.
The government usually revises the method of calculating national accounts and other macro data every five years, bringing in a newer base year and adjusting for changes in the economy.
The new government of Prime Minister Narendra Modi, which is committed to raising economic growth and slashing the fiscal deficit, plans to adjust the measurement early in 2015, a senior official at the Ministry of Statistics said.
“We plan to release GDP data based on the 2011-12 base year by early next year, that could theoretically revise up the growth estimates,’’ the official said, requesting anonymity as he was not authorised to speak to media.
The Ministry now takes 2004-05 as the base. India’s informal economy and service sector accounts for over three-fifths of its $1.8 trillion economy. But precise data are unavailable for these segments, and the government relies on surveys and samples to calculate their growth.
This is combined with actual output numbers for mainstream industry to produce the GDP data.
In March, 2010, when the government last revised the national accounts, annual economic growth estimates were upwardly adjusted by 0.8 to 1.7 percentage points for four years, allowing the previous government to take credit for the country’s highest-ever stretch of economic growth.
Pronob Sen, former chief statistician and current chair of the National Statistics Commission, said the planned adjustment would likely reveal that the Asia’s third-largest economy is bigger than previously reckoned in absolute numbers.
“Basically, we have an upward revision because some sectors are not included in the current data,’’ he said, mentioning higher productivity among informal manufacturing and services firms as well as the advent of new sectors.
Mr. Sen predicts that the country’s economy, which grew by a stronger-than-expected 5.7 per cent in the quarter ending in June, will grow 6 per cent this fiscal year even without the planned revision.
The 2010 revision almost doubled the estimated contribution to the economy made by coaching and tuition and gave substantially more weight to the construction, trade and hotel industries.
The importance ofbeauty salons, communication and railways declined.
Big boost Any upward revision this time will be a big boost for Mr. Modi and his Finance Minister Arun Jaitley, who is trying to meet a fiscal deficit target of 4.1 per cent of the GDP and convince global rating agencies to upgrade India’s sovereign ratings.
