Haq's Musings: India's New GDP Figures: Modi Takes BS Seriously!
"The estimated “evacuation (defecation) rates” are 0.3 kilograms per day for goats and 0.8 kilograms per day for sheep. The study, titled “Positive Environmental Externalities of Livestock in Mixed Farming Systems of India,” was conducted jointly by the Central Institute for Research on Goats, in Makhdoom, Uttar Pradesh, and the National Center for Agricultural Economics and Policy Research in New Delhi. With all those “droplets” added in, the value of India’s livestock sector in the new GDP series is 9.1 billion rupees, or $150 million, higher than it was in the old series." Wall Street Journal on India's GDP Revisions
Animal droppings (BS) is just one of many innovations of Central Statistical Office (CSO) that are being used to support India's claim to be growing faster than China. Until early February, when CSO changed the way it measures economic activity, India was enduring its weakest run of growth since the mid-1980s. Now it is outpacing China, having grown an annual 7.5% in the fourth quarter of last year, reports Business Standard.
Indian Livestock GDP Calculations. EOG=Edible Offals, Glands. Source: CSO Via WSJ
While India's boosters in the West are not only buying but applauding the new figures, Indian policy professionals at the nation's Central Bank and the Finance ministry are having a very hard believing the new and improved GDP brought to the world by Indian government. Dissenters include Morgan Stanley's Ruchir Sharma, an Indian-American, who has called the new numbers a "bad joke" aimed at a "wholesale rewriting of history".
Based on the latest methodology, it is claimed that the Indian economy expanded 7.5 percent year-on-year during the last quarter, higher than 7.3 percent growth recorded by China in the latest quarter, making it the fastest growing major economy in the world, according to Reuters. Is it wishful thinking to make Indian economy look better than China's?
India GDP Revisions. Source: Financial Times
The GDP revisions have surprised most of the nation's economists and raised serious questions about the credibility of government figures released after rebasing the GDP calculations to year 2011-12 from 2004-5. So what is wrong with these figures? Let's try and answer the following questions:
1. How is it possible that the accelerated GDP growth in 2013-14 occurred while the Indian central bankers were significantly jacking up interest rates by several percentage points and cutting money supply in the Indian economy?
2. Why are the revisions at odds with other important indicators such as lower industrial production and trade and tax collection figures? For the previous fiscal year, the government’s index of industrial production showed manufacturing activity slowing by 0.8%. Exports in December shrank 3.8% in dollar terms from a year earlier.
3. How can growth accelerate amid financial constraints depressing investment in India? Indian companies are burdened with debt and banks are reluctant to lend.
4. Why has the total GDP for 2013-14 shrunk by about Rs. 100 billion in spite of upward revision in economic growth rate? Why is India's GDP at $1.8 trillion, well short of the oft-repeated $2 trillion mark?
Questions about the veracity of India's economic data are not new. US GAO study has found that India's official figures on IT exports to the United States have been exaggerated by as much as 20 times.
Similarly, French economist Thomas Piketty has argued in his best seller "Capital in the Twenty-First Century that the GDP growth rates of India and China are exaggerated. Picketty writes as follows:
"Note, too, that the very high official growth figures for developing countries (especially India and China) over the past few decades are based almost exclusively on production statistics. If one tries to measure income growth by using household survey data, it is often quite difficult to identify the reported rates of macroeconomic growth: Indian and Chinese incomes are certainly increasing rapidly, but not as rapidly as one would infer from official growth statistics. This paradox-sometimes referred to as the "black hole" of growth-is obviously problematic. It may be due to the overestimation of the growth of output (there are many bureaucratic incentives for doing so), or perhaps the underestimation of income growth (household have their own flaws)), or most likely both. In particular, the missing income may be explained by the possibility that a disproportionate share of the growth in output has gone to the most highly remunerated individuals, whose incomes are not always captured in the tax data." "In the case of India, it is possible to estimate (using tax return data) that the increase in the upper centile's share of national income explains between one-quarter and one-third of the "black hole" of growth between 1990 and 2000. "
T.C.A. Anant, the chief statistician of India, has told the Wall Street Journal that “there’s a large number of areas where we have deviated (from the United Nations’ latest guidebook on measuring GDP) for a large measure, because we are simply, at the moment, unable to implement those recommendations.”
Related Links:
Haq's Musings
Is India Fudging GDP to Look Better Than China?
India's IT Exports Highly Exaggerated
India-Pakistan Economic Comparison 2014
Pakistan's Official GDP Figures Ignore Fast Growing Sectors
Challenging Haqqani's Op Ed: "Pakistan's Elusive Quest For Parity"
State Bank Says Pakistan's Official GDP Under-estimated
Pakistan's Growing Middle Class
Pakistan's GDP Grossly Under-estimated; Shares Highly Undervalued
Fast Moving Consumer Goods Sector in Pakistan
3G-4G Roll-out in Pakistan
Pakistan Government Deploys Mobile Apps
Haq's Musings: India's New GDP Figures: Modi Takes BS Seriously!
"The estimated “evacuation (defecation) rates” are 0.3 kilograms per day for goats and 0.8 kilograms per day for sheep. The study, titled “Positive Environmental Externalities of Livestock in Mixed Farming Systems of India,” was conducted jointly by the Central Institute for Research on Goats, in Makhdoom, Uttar Pradesh, and the National Center for Agricultural Economics and Policy Research in New Delhi. With all those “droplets” added in, the value of India’s livestock sector in the new GDP series is 9.1 billion rupees, or $150 million, higher than it was in the old series." Wall Street Journal on India's GDP Revisions
Animal droppings (BS) is just one of many innovations of Central Statistical Office (CSO) that are being used to support India's claim to be growing faster than China. Until early February, when CSO changed the way it measures economic activity, India was enduring its weakest run of growth since the mid-1980s. Now it is outpacing China, having grown an annual 7.5% in the fourth quarter of last year, reports Business Standard.
Indian Livestock GDP Calculations. EOG=Edible Offals, Glands. Source: CSO Via WSJ
While India's boosters in the West are not only buying but applauding the new figures, Indian policy professionals at the nation's Central Bank and the Finance ministry are having a very hard believing the new and improved GDP brought to the world by Indian government. Dissenters include Morgan Stanley's Ruchir Sharma, an Indian-American, who has called the new numbers a "bad joke" aimed at a "wholesale rewriting of history".
Based on the latest methodology, it is claimed that the Indian economy expanded 7.5 percent year-on-year during the last quarter, higher than 7.3 percent growth recorded by China in the latest quarter, making it the fastest growing major economy in the world, according to Reuters. Is it wishful thinking to make Indian economy look better than China's?
India GDP Revisions. Source: Financial Times
The GDP revisions have surprised most of the nation's economists and raised serious questions about the credibility of government figures released after rebasing the GDP calculations to year 2011-12 from 2004-5. So what is wrong with these figures? Let's try and answer the following questions:
1. How is it possible that the accelerated GDP growth in 2013-14 occurred while the Indian central bankers were significantly jacking up interest rates by several percentage points and cutting money supply in the Indian economy?
2. Why are the revisions at odds with other important indicators such as lower industrial production and trade and tax collection figures? For the previous fiscal year, the government’s index of industrial production showed manufacturing activity slowing by 0.8%. Exports in December shrank 3.8% in dollar terms from a year earlier.
3. How can growth accelerate amid financial constraints depressing investment in India? Indian companies are burdened with debt and banks are reluctant to lend.
4. Why has the total GDP for 2013-14 shrunk by about Rs. 100 billion in spite of upward revision in economic growth rate? Why is India's GDP at $1.8 trillion, well short of the oft-repeated $2 trillion mark?
Questions about the veracity of India's economic data are not new. US GAO study has found that India's official figures on IT exports to the United States have been exaggerated by as much as 20 times.
Similarly, French economist Thomas Piketty has argued in his best seller "Capital in the Twenty-First Century that the GDP growth rates of India and China are exaggerated. Picketty writes as follows:
"Note, too, that the very high official growth figures for developing countries (especially India and China) over the past few decades are based almost exclusively on production statistics. If one tries to measure income growth by using household survey data, it is often quite difficult to identify the reported rates of macroeconomic growth: Indian and Chinese incomes are certainly increasing rapidly, but not as rapidly as one would infer from official growth statistics. This paradox-sometimes referred to as the "black hole" of growth-is obviously problematic. It may be due to the overestimation of the growth of output (there are many bureaucratic incentives for doing so), or perhaps the underestimation of income growth (household have their own flaws)), or most likely both. In particular, the missing income may be explained by the possibility that a disproportionate share of the growth in output has gone to the most highly remunerated individuals, whose incomes are not always captured in the tax data." "In the case of India, it is possible to estimate (using tax return data) that the increase in the upper centile's share of national income explains between one-quarter and one-third of the "black hole" of growth between 1990 and 2000. "
T.C.A. Anant, the chief statistician of India, has told the Wall Street Journal that “there’s a large number of areas where we have deviated (from the United Nations’ latest guidebook on measuring GDP) for a large measure, because we are simply, at the moment, unable to implement those recommendations.”
Related Links:
Haq's Musings
Is India Fudging GDP to Look Better Than China?
India's IT Exports Highly Exaggerated
India-Pakistan Economic Comparison 2014
Pakistan's Official GDP Figures Ignore Fast Growing Sectors
Challenging Haqqani's Op Ed: "Pakistan's Elusive Quest For Parity"
State Bank Says Pakistan's Official GDP Under-estimated
Pakistan's Growing Middle Class
Pakistan's GDP Grossly Under-estimated; Shares Highly Undervalued
Fast Moving Consumer Goods Sector in Pakistan
3G-4G Roll-out in Pakistan
Pakistan Government Deploys Mobile Apps
Haq's Musings: India's New GDP Figures: Modi Takes BS Seriously!
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If we can quietly keep adding the trillions, only a decade or so will be needed for us to reach a strong position (by which time our economic and military transition will be mostly complete).
