Growth figures under a cloud

The presence of thousands of ghost firms in the official database must be investigated thoroughly instead of sweeping it under the carpet

AuthorPublished: 11th May 2019  12:00 amUpdated: 10th May 2019  6:21 pm

The NDA government finds itself at the centre of a storm over inconsistencies in data pertaining to growth figures. This does not augur well for the institutional integrity and credibility of the ruling dispensation. A fresh row revolves around a new report of the National Sample Survey Office (NSSO), which states that at least one-third of the companies in the database used for GDP calculation could not be traced or surveyed. The older GDP series had relied on a survey of companies conducted by the Reserve Bank of India for the private sector while the new one— started in 2015 —employed the database maintained by the Ministry of Corporate Affairs (MCA) that contains a list of registered companies. The NSSO study found that nearly 36% of the companies that are part of the MCA database of companies and are used in GDP calculations could not be traced or were wrongly classified. It means that India’s GDP calculations are based on companies which are either fictitious or not doing what they are supposed to be doing. This is perhaps the most damning indictment of the official GDP figures so far. The presence of thousands of ghost firms in the official database must be investigated thoroughly instead of sweeping it under the carpet. The credibility of the government’s economic data took a beating earlier when an NSSO survey found that the country’s unemployment rate was at a 45-year high of 6.1% during 2017-18.

Instead of making the report public, the government referred it to the Niti Aayog on the ground that the data was not verified. The controversial move had led to the resignation of two non-government members of the National Statistical Commission. In fact, a debate has been raging over the accuracy of growth figures ever since the Centre released the back series data in November last year using a new methodology that brought forward the base year used for calculations to 2011-12 from the previous 2004-05. The new numbers showed that the GDP growth during the UPA regime from 2004 to 2014 averaged 6.7% while the present NDA government witnessed an average of 7.35% in four years. This has, understandably, triggered political furore with the Congress crying foul and accusing the Centre of trying to fudge figures to suit its political narrative ahead of general elections. The new number lowers the peak GDP growth rate under the UPA from 10.3% in 2010-11 to 8.5%. The arguments over the GDP numbers, which are arrived at through a set of assumptions and complicated calculations, can be very tricky as they are amenable to flexible interpretation to suit one’s preconceived narrative. The government must clear the air and allow the statistics to speak for themselves.