Is India’s economic growth story impressive? Even RBI economists are getting confused; here’s why

By: | Updated: May 3, 2018 7:27 PM

The Reserve Bank of India (RBI) has questioned multiple revision of GDP data, saying that it may be "confusing for data users" to decide on the true state and the growth momentum of the economy.

The Reserve Bank of India (RBI) has turned down a proposal from banks seeking priority-sector status to loans disbursed under affordable housing.The Reserve Bank of India (RBI) has turned down a proposal from banks seeking priority-sector status to loans disbursed under affordable housing.

The Reserve Bank of India (RBI) has questioned multiple revisions of GDP data, saying that it may be “confusing for data users” to decide on the true state and the growth momentum of the economy. The analysis of data revisions by RBI shows a “general bias” towards “upward revisions” in growth as compared to the advance estimates that tend to be understated.

While GDP revisions are not uniquely done in India, the RBI said that the advance estimates released by the Central Statistics Office (CSO) usually tend to “understate” the growth of the Indian economy. The dilemma regarding the reliability of data is usually the greatest around the release of advance estimates. The advance data is “generally understood to be tentative and liable to change with the arrival of subsequent firmer datasets”, the central bank said.

“We also observe a ‘bias’ in revisions at the turning points of the growth cycle possibly due to the methodology used by the CSO as the sector-wise estimates are obtained using benchmark indicator approach by linear extrapolation,” the RBI said. It suggested the CSO to use high-frequency economic indicators such as commercial vehicles and international air passenger traffic.

The CSO is the nodal agency for releasing data related to national income, consumption expenditure, savings and capital formation since 1956. The RBI analysis observed that the CSO revised real GVA growth estimates upwards in ten years, and downwards in the remaining four years. “Average upward revision was of the order of 70 basis points, while it was only 27 basis points in the case of downward revisions,” the RBI said.

The CSO has revised the GDP growth for the FY14 to 6.1% from preliminary 6.4%; FY15 to 7.2% from 7.5%; FY16 to 8.2% from 8%. It kept the GDP growth rate for FY17 unchanged at 7.1%.

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