India's annual growth rate in the two years since the present government assumed office has been impressive. It was 7.2% in 2014-15 and 7.6% in 2015-16. In the last quarter of 2015-16 it was 7.9% which was a matter of great joy and celebration.
The method of calculating the GDP was changed by the government when it came into office in 2014. Instead of calculating growth in terms of increase in production, we shifted to calculating it in terms of the value added. According to this formula, the growth rates of 2012-13 and 2013-14 were also revised upwards from 4.5% to 5.6% and 4.7% to 6.6% respectively. The Congress party did not challenge the new formula because it provided great relief to it because it considerably upped the growth rate as far as the last two years of its regime are concerned. Others did not challenge it because it was consistent with international practice. But today, a debate is raging about the validity of the latest figures released by the Department of Statistics.
What are the issues being debated? The first - and perhaps the most important - is regarding the role played by the so-called 'discrepancies' in the calculation of GDP. Obviously the 'discrepancy' figure which was less than Rs 30,000 crore a year ago has gone up to Rs 1,40,000 crore in 2015-16, and it is this increase which has bloated the growth figure of the last quarter. The second is that if the 'discrepancies' are taken out, then the growth figure sinks to 3.9%. The third is that there is a big contradiction between the growth figures when looked at from the demand side and from the supply side. The supply side shows a growth of 7.9%, and the demand side shows a growth of 5.4%. The fourth factor which baffles analysts is that if industrial production is not growing, if exports are down month after month, if the banks are distressed and NPAs (non-performing assets) are increasing, if private sector investment is not picking up, if agriculture is in distress and if the services sector is stagnating, then where is this growth coming from?
Now the
US has joined the chorus and its State Department has said that though India is one of the fastest growing countries in the world, the depressed investor sentiment suggests that the 7.5% growth rate maybe overstated.
So even if we do not take domestic critics seriously, we cannot let our best friend, namely the US, remain unconvinced? The
desis can get lost, but the government of India cannot ignore the sentiment in Washington. It has to come out with a clarification, and preferably at the political level, because that is where the celebrations are the most joyful.
The task is enormous. The Chief Statistician of the Government of India had promised a month ago that he would release the supply use table (SUT) to clear the data discrepancies. However, they would be only for the years 2011-12 and 2012-13. Such data release in whatever form for 2015-16 should also be released simultaneously so that it can also be scrutinized by the experts. We cannot allow the confusion to continue for years.
When I was a district officer in the late 60s of the last century, we were called upon to collect and submit various growth statistics to the state headquarters for compilation and onward transmission. We used to collect these figures from the Revenue Department employee at the village level. He used to do it on the basis of 'eye estimation', specially as far as agricultural statistics were concerned. It can easily be guessed how reliable would such estimates be. Since I was aware of this fundamental weakness in the collection of our statistics, in my budget speech of 1999, I proposed that the whole issue of collection, compilation and retrieval of statistics be looked at afresh. We appointed a committee under Dr Rangrajan to examine the whole issue and give us a report. He did so and some institutional and administrative changes have been made on the basis of that report.
But when I was chairing the standing committee on Finance during the last Lok Sabha, we used to examine the functioning of the Department of Statistics also. At times we were aghast at some of its bloopers.
We demonstrated a very low ability even when counting the growth in terms of increase in production figures. Now that we are doing it in terms of value added, the task has become more onerous. Is the Department of Statistics fully equipped to deal with the new challenge? Can we trust the statistics dished out by it?
The issue is serious because it relates to the trust people have in our system. We should not allow that to be shaken.
(Yashwant Sinha is a senior BJP leader and former Union Minister of External Affairs.)Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.