Stung by glitches in the economic growth data for Apr-Jun, the government is reviewing methodology for calculating quarterly GDP figures.

?The department of statistics will also put in place more checks to ensure such glitches do not recur,? government?s chief statistician, TCA Anant, said. Official data for gross domestic product in Apr-Jun?the first quarter of this financial year?was released last week. The glitches were in the Apr-Jun GDP figures at market prices, which is calculated from expenditure side. According to these estimates of GDP from the demand side, as it is called, growth was as low as 3.7%. The problem was in the price deflator that had been applied, and a couple of days later, the government revised it to 10.2% using new deflators.

The demand-side estimate is less followed by economists. Most references to growth are the GDP at factor cost, which looks at the output or supply-side. ?The expenditure side GDP growth calculation is a recent exercise, which is being done for quarterly data for the last two or three years,? Anant said. GDP figures at factor cost arrived at from output-side was more representative and its methodology was well-founded, he said.

Apr-Jun GDP at factor cost?that is calculation of aggregate output of the economy from production side?was 8.8%, which was consistent with estimates by others as well, Anant said. The quarterly GDP from the production side is being calculated for the last 10-12 years and data are more precise, he said.

Agriculture output and Index of Industrial Production figures, which are well-established, go into the calculation of GDP growth figures. The error in GDP growth calculation at market prices crept-in as inappropriate deflators were inadvertently used, he said.

?There were a lot of extrapolation involved in the calculation of expenditure-side data, and, hence, chances of going wrong too were high,? he said, adding this is because the projection base is fragile unlike in production data.

?We plan to review the methodology for calculation of demand-side quarterly GDP growth,? he said. ?We have also set in motion correction of the internal process so that such glitches do not recur,? Anant said. The advisory committee for national accounts will also discuss the issue, he said.

Anant said he proposed to put the present methodology on a website to include a wider public comment as part of the review process. The GDP at market prices include indirect taxes while GDP at factor cost excludes it.

Dec inflation 7% vs 6% forecast

The country?s inflation rate is sliding, but it may fall less than official forecasts, the government?s chief statistician says.

Anant expects wholesale price inflation will fall to 7% by December, a tad higher from the 6% forecast by Prime Minister Manmohan Singh and several officials dealing with economic or financial affairs, including the deputy chairman of the Planning Commission.

?Inflation is coming down… the trend is downward in the last few months,? Anant said. ?I expect (inflation) to be about 7% by December,? he said, adding that ?the perception is that any figure above 6% is perceived to be high.?

RBI expects WPI inflation at 6.5% by March. The annual pace of most inflation gauges was weakening, but consumer price inflation was still at discomforting level, Anant said. The headline inflation is based on the WPI and it eased marginally to 9.97% in July from June?s 10.55%. It peaked to 11.2% in April. In July, Consumer Price Index for Industrial Workers rose 11.25% compared with 13.73% in June. Good monsoon this year is expected to improve agriculture production and this would help in easing inflation further, Anant said.

He preferred not to say if RBI would hike interest rates to fight off inflation when it unveils its first-ever mid-quarter monetary policy review on Sep 16.

FY11 growth 8.5% despite slow Q2

The country?s economic performance was on track to meet projected 8.5% growth this fiscal year, despite growth in the current quarter likely below the 8.8% achieved in the previous three months, government?s chief statistician said Thursday.

?I do not see any reason to believe, at this stage, that overall growth will be less (than forecast) this financial year. 8.5% is well on the cards,? Anant said.

Gross domestic product expanded 6.7% in the last financial year that ended in March, down from 9.0% in the previous year. Economic growth in Apr-Jun was 8.8%, which was an impressive growth notwithstanding the fact that it was partly due to low base effect, he said. ?Revival of domestic demand will ensure we reach the overall GDP growth target of 8.5% in 2010-11,? he said in an exclusive interview to TickerNews. Because of high base GDP growth in Jul-Sep–second quarter of this fiscal year–might not match the first quarter?s strong showing, Anant said.

The high base effect will be partly offset by improvement in agriculture output in Jul-Sep, he said, preferring not to hazard a guess on GDP growth numbers for the second quarter. Due to high base, industrial growth too might slow a bit in Jul-Sep quarter. However, in the fiscal year as a whole, industrial growth will be good.

Third and fourth quarter growth numbers would be good this year, especially with a pick-up in growth of agriculture production. He said double-dip depression in the US and economic crisis in Europe will not drastically impact India?s growth story.

?Even during the worst of global economic crisis, India clocked 6.7% GDP growth in 2008-09. Revival of domestic demand will ensure we reach the overall GDP growth target of 8.5% in 2010-11,? he said.