Indian Economic Growth Revised Up by Almost 50%

[ares]

Economic Growth Revised Up by Almost 50%
Reuters | Updated On: January 30, 2015 21:06 (IST)

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New Delhi: India's economy grew almost 50 per cent faster in 2013/14 than earlier thought, the government said on Friday after changing a formula, a reminder of the challenges that unreliable statistics present to Indian policymakers.

In the year leading up to the elections that brought Prime Minister Narendra Modi to power last May, the economy grew 6.9 per cent, not the 4.7 per cent reported earlier, chief statistician T.C.A. Anant told reporters.

PM Modi's campaign succeeded partly because of the widespread feeling that his predecessors from the Congress party had plunged the economy into the country's longest deceleration in growth in a generation.

The revised formula, showing a faster recovery, includes under-represented and informal sectors as well as items such as smartphones and LED television sets in gross domestic product.

That could boost India's growth figure in the year ending in March 2015, which the Reserve Bank of India (RBI) has projected to be around 5.5 per cent.

Some in government predict the change will help bring down the fiscal deficit as a share of gross domestic product, making it easier for Modi to trim the gap to a seven-year low of 4.1 per cent in the year to March despite a shortfall in revenue.

However, Mr Anant said the overall size of India's $1.8 trillion economy had not changed enough to shift the ratio significantly, adding: "Our ranking in GDP terms will not change as the size of economy has almost remained the same."

The new methodology moves India more in line with global standards by measuring the economy at market prices, and by tracking consumer rather than wholesale inflation.

"This will help lower market distortions and give better representation to the manufacturing sector," said Soumya Kanti Ghosh, chief economic adviser at State Bank of India.

But the frequent GDP revisions and other deficient data are a headache for economic planners.

Among the worst offenders are the volatile index for industrial production and the jobless numbers, seen as very unrepresentative. The latest GDP revision is part of a change to the method of calculating national accounts that happens every five years.

"It is a problem for the government and economists who are trying to understand the exact situation," said D.H. Pai Panandiker, president of RPG Foundation, an economic policy group in New Delhi. "It is even a problem for the RBI, that doesn't have a full view about how the economy is performing."

Copyright: Thomson Reuters 2015

 

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Base Year Revision Takes 2013-14 GDP growth to 6.9%
Reuters | Updated On: January 30, 2015 18:11 (IST)

More From Economy


New Delhi: The government revised up its economic growth to 6.9 per cent from 4.7 per cent in the fiscal year to March 2014 on Friday after the government changed the formula to measure the economy, a move that will make it easier for the government to meet fiscal deficit goals.

The new measurement of gross domestic product (GDP) includes under-represented and informal economic sectors as well as items such as smartphones and LED television sets.

The government also revised its GDP for 2012/13 to 5.1 per cent from 4.5 per cent earlier.

The government 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.

It will now use 2011-12 as the new base year, instead of 2004-05.

Copyright: Thomson Reuters 2015

 

[Bagha]

I smell more money in the air bro.

 

[Turingsage]

This base year jiggery-pokery is what makes a mockery of Pakistans GDP figures which have become a laughing stock within the IMF and ADB. India now walking the same path.

 

[ares]

Base year revision to up Indian economy to Rs 111 trillion in FY14
PTIJan 28, 2015, 04.40PM IST

Tags:

• 

(A base year change is a regular…)

NEW DELHI: The revision in base year of India's national accounts will increase the size of the economy to Rs 111.7 trillion in FY14, India Ratings (Ind-Ra) said today.

The size of the Indian economy was at about Rs 93.89 trillion in 2012-13.

A base year change is a regular and methodological issue not limited to India only and almost all countries revise the base year of their national accounts.

"Ind-Ra expects the size of the Indian economy to increase 6 per cent to Rs 111.7 trillion (USD 1.8 trillion) in FY14 from the earlier estimate with the change of base to FY12," the ratings firm said in a release.

It expects India's fiscal deficit to decline to about 4.3 per cent of the GDP (from 4.6 per cent earlier) in FY14. Also, the current account deficit (CAD) is likely to fall to 1.6 per cent of the GDP (from 1.7 per cent) as a result.

"The agency further expects the Indian economy to become a USD 3 trillion by FY 2019-20 with the change in base to FY12. On FY05 base, this would have happened a year later that is in FY21," it said.

With a view to present a more realistic picture of the economy, the government plans to release a new series of national accounts with 2011-12 as base year for computing the economic growth rate.

The National Statistical Commission has recommended changing the base year of National Accounts Statistics every five years.

According to Ind-Ra, the base year should be changed frequently in view of fast-changing economic structure as well as to update or estimate national accounts on the basis of latest available data.

However, the agency does not expect the change in base year to result in any significant change in GDP (Gross Domestic Product) growth rate.

The base year change is in line with the system of national accounts and the internationally agreed standard set of recommendations to compile measures of economic activity in accordance with strict accounting conventions based on economic principles.

Govt to release revised estimates of GDP with new base year
The new measurement will set the base year as 2011-12 as opposed to the earlier 2004-05


Ishan Bakshi | New Delhi
January 30, 2015 Last Updated at 11:37 IST




Revised estimates of the gross domestic product (GDP), which are expected to be released later on Friday, is likely to show an increase size of the Indian economy by around 6 per cent to an estimated $1.8 trillion in 2013-14, says India Rating and Research (Ind-Ra), a Fitch group company.

Since the new base year is 2011-12, the revision would be made for 2012-13 and 2013-14 GDP numbers.
Every five years, the Ministry of Statistics and Programme Implementation (MOSPI) updates the base year of its GDP calculations. The current GDP estimates use 2004-05 as the base year which the government is changing to 2011-12.

In two of the last three base year changes, when the base year was changed to FY94 from FY81 and to FY05 from FY00, the size of economy changed significantly, while in the third case it did not change much. This time with the change in base year, Ind-Ra expects the size of the Indian economy to increase to Rs 111.7 trillion or $1.8 trillion in FY14.

It should be noted that any revision in the base, theoretically, should not lead to change in size of the economy. It is so because change in base does not alter GDP in nominal terms. However, the increase in the GDP size comes mainly due to the use of more up-to-date information in the compilation and estimation of national accounts. This is because new goods and services keep entering the system.

For example the 2004-05 base would not have captured the production of LED TVs which did not exist at that time. The change in base year will incorporate information from latest data sources such as the Census 2011, National Sample Survey Organisation’s (NSSO) employment-unemployment and Consumer Expenditure Surveys for 2011-2012, the debt and Investment Survey of 2013, the Annual Survey of Industries (ASI) 2012-2013 and the all India Livestock Census 2012.

With an increase in the size of the GDP, indicators such as the fiscal deficit and current account deficit which are expressed as a percentage of GDP are likely to decline to 4.3 per cent from 4.6 per cent of GDP in FY14 and from 1.7 per cent to 1.6 per cent of GDP respectively. While this does ease the fiscal deficit constraint, Aditi Nayar, chief economist at ICRA cautions, saying that compliance with fiscal targets should be assessed in absolute terms, for instance, comparing the Central Government's fiscal deficit for 2014-15 to the budget estimate of Rs.5.3 lakh crore.

However, fiscal deficit or current account deficit is expressed as percentage of GDP since it becomes difficult to compare absolute numbers with previous year figures and hence setting the target becomes difficult.

The Ind-Ra estimates however do not take into account changes due to the Annual survey of industries for 2012-13. For initial estimates of industrial growth, the government relies on the Index of Industrial Production (IIP) data which is largely collected from the a organised sector. But theASI data is a more comprehensive set than the index of industrial production (IIP), as it encompasses small and medium industries as well, covering all units that employ at least 10 workers and use power or 20 workers but do not use power. But as these results come out with a considerable lag, IIP estimates are used in the interim. These estimates undergo changes when the results of annual survey of industries are available.
The latest ASI data shows that gross value added in the manufacturing sector grew at 3.9 per cent in 2012-13. This is lower than the growth of manufacturing used for computing GDP in 2012-13 which was 6.85 per cent. This would suggest that GDP growth could be revised downwards. But Madan Sabnavis at Care says that there is not a one on one correspondence between ASI and GDP data. This is because ASI data does not include net indirect taxes and subsidies and other adjustments are often made.
With the revision in base, Ind-Ra further expects the Indian economy to become a three trillion dollar economy by the end of this decade. On the previous base, this milestone would have been achieved a year later.

 

[SrNair]

This base year jiggery-pokery is what makes a mockery of Pakistans GDP figures which have become a laughing stock within the IMF and ADB. India now walking the same path.

There is no mockery in that .We changed our base year and changes was already happened in 2012-13 where GDP revised from 4.5% to 5.1%.Same procedure happened in this financial year.Thats all.
But according to their TTA Pakistan is still following 1999-2000 base year.There isa lot difference.