When Union Finance Minister >Arun Jaitley defended the Central Statistical Office (CSO) strongly last week in the Rajya Sabha, he was essentially responding to the incredulity with which politicians and economists alike have in recent times reacted to India’s reworked growth numbers. A new methodology, unveiled toward the end of January by the CSO, presented a rosier picture of the Indian economy than previously imagined. It, for instance, indicated a growth in gross domestic product of 6.9 per cent in 2013-14, quite a jump from the 4.7 per cent estimated earlier. Growth rates for earlier years were upgraded too. To be fair, a lot has changed from the old framework, and it is no minor tweak. One change made relates to the base year, on which comparisons are made. Two, there is now an attempt to capture value addition, rather than growth through volumes, in the calculation of the Gross Domestic Product (GDP). Three, data from newer, more sophisticated corporate databases have been used. Four, GDP will be measured at market prices, by adding taxes to and reducing subsidies from what used to be the main measure till now, GDP at factor cost. All these changes, many experts acknowledge, are important for Indian metrics to match international ones. Still, there is something discordant about the rosy numbers, on the one hand, and the economic lethargy on the ground, on the other. The high growth projection of 7.4 per cent for 2014-15 somehow seems out of sync with low industrial production, poor corporate performance and less-than-expected tax collections.
That’s why even economists were stumped by the extent of the changes. In the >Economic Survey , preceding the Budget, Chief Economic Adviser Arvind Subramanian noted that the numbers were “puzzling”. He >cautioned against interpreting it as evidence of a surging economy. The controversy also quickly acquired a political colour, unsurprising because it did now seem that the final years of the United Progressive Alliance government saw far healthier growth than it was thought then. Also, the campaign of Narendra Modi in the run-up to the 2014 parliamentary elections focussed a good deal on what he called the mismanagement of the economy. Then, there were commentators who compared India with China, not only on the point of growth but also less generously on the issue of disputed official data, which the latter is so often accused of fudging. It is in this context that Mr. Jaitley’s defence of the CSO needs to be seen. Yes, it may do little to ease the doubts of experts who feel there are discrepancies in data. But by calling the statistical body a “credible” and independent organisation, which needed to be reiterated, the Finance Minister has, at the least, sent the right political message.
