A lot of buzz was created over the weekend on back series GDP data calculated by a panel, with the Congress claiming higher growth in its tenure and the NDA government saying that the data is not yet official.
A lot of buzz was created over the weekend on back series GDP data calculated by a panel, with the Congress claiming higher growth in its tenure and the NDA government saying that the data is not yet official. The back series data, calculated by a sub-committee formed by the National Statistical Commission, showed that India clocked 10% plus GDP growth in 2007-08 and 2010-11, which, economists say, was not unknown.
“Most of the information about GDP series was already in public domain (for example, we already had a 10.3% growth in 2010-11 as per the old data, now revised to 10.8%) and thus the buzz about the recent data is intriguing,” SBI Economic Research Department said in a report.
Here are five things that we learn from GDP back series data beyond 10% economic growth
1. GDP lower than GVA: In a usual case, Gross Domestic Product (GDP) is higher than Gross Value Added (GVA) as the former also includes indirect tax collections as well. However, the SBI report points out that the GDP was lower than GVA in FY99, FY04, FY07, FY10, and FY12. “One possible reason for such could be fertiliser subsidy was scaled up significantly from FY06 following poor agricultural growth,” the report said.
2. High growth, low net indirect tax collection: Even as India’s economic growth was expanding at 9.5%, net indirect tax collections grew by only 6.5%, possibly due to the high subsidy. Drought years 2002, 2004 and 2009 could have also been at play despite economic buoyancy.
3. 10.8% growth but not for long: As per back series data, India clocked the highest growth of 10.8% in 2010-11 but it could not sustain the high growth due to high inflation. “GDP was higher by GVA by a massive 301 basis points
on the back of huge fiscal stimulus (subsidies growing by a massive 83%). The fiscal stimulus did push up the growth rate to 10.8% in FY11 from 4.2% in FY09 but it did not sustain for long with a jump in inflation,” SBI report said.
4. 2004-2011, the golden period: The SBI report pointed out that India witnessed massive nominal GDP growth beginning FY04 and touched the peak of 21% in FY11. The GDP averaged 8% between FY09 and FY13 on the back of fiscal stimulus and inflation.
In 2014, the government changed the base year for calculation of national accounts to 2011-12 from 2005-06 to include more sectors with an aim to present a more realistic picture of the Indian economy. This year again, the base year for calculation of GDP and IIP was changed to 2017-18.