After slashing India’s growth estimate for the fiscal year 2019-20 and FY 2020-21 by 20 basis points, Gita Gopinath, chief economist, International Monetary Fund (IMF), sent out a message to India on the gross domestic product (GDP) math and the state of statistics. There are still some issues with the way India calculates its growth rate and the IMF is paying close attention to the new numbers that are coming out, said Gopinath to CNBC.
Gopinath said, “With regards to the newer numbers that are coming out, we are paying close attention to it, we are speaking closely to our colleagues in India and then we will make a determination based on that.”
While she welcomed the changes made to the GDP calculation in 2015, including the change in base year, she also flagged concerns over the “deflator” used to calculate the real GDP.
“There were important revisions that were made in 2015 as a part of modernizing India's national accounts statistics, so that is certainly welcome. That said there are still some issues that need to be fixed and this we have flagged before with respect to the deflator that is being used for estimating real GDP, this is something we have flagged in the past.” Gopinath said.
Essentially, a GDP deflator is a measure of inflation. It is the ratio of the value of goods and services an economy produces in a particular year at current prices to that of prices that prevailed during the base year. It helps to capture the extent of increase in the GDP due to higher prices rather than an increase in output.
Gopinath also underlined the need for India to communicate more transparently about its statistics given its significance in the global landscape.
“India is projected to be growing over 7 percent both in 2019 and 2020 which makes it one of the fastest growing large economies of the world, which is why it is even more important that the statistics coming out of India are transparently communicated because everybody is watching India at this point” said the IMF chief economist.
These comments from Gopinath come after the government revised GDP data in February for the FY 2016-17 and FY 2017-18. For the FY 2016-17, GDP was revised sharply upwards from 7.1 percent to 8.2 percent making it the best year of growth under Modi Government. This was also the year in which the Government demonetised Rs 500 & Rs 1,000 currency notes.
In a recent interview with CNBC-TV18, former RBI Governor Raghuram Rajan expressed doubts over India’s GDP data. “I am in the camp that has no idea what the statistics are at this point,” Rajan had said. He also went on to call for a comprehensive review.
“I would say setting up an impartial body to look at it is an important step to restoring confidence and it may well be that that body pronounces such to rebuild confidence, but we absolutely need better confidence in our GDP numbers now given the back and forth that we had,” said Raghuram Rajan.
"I know one minister (in the Modi government) has said (that) how can we be growing at 7 percent and not have jobs. Well, one possibility is that we are not growing at 7 percent," Rajan told CNBC TV18, while not disclosing the name of the minister.
India’s premier statistics body is now in disarray. Two members, including the head of the National Statistical Commission (NSC) had quit, protesting the stalling of an NSSO survey which reportedly shows unemployment in India is at a 45-year high. The report has since been leaked to the press but the Government said it had not been finalised yet. P C Mohanan, who resigned as the acting head of the NSC warned against “statistics being used as a political tool”
In a recent interview to News18, Prime Minister Narendra Modi underlined how global agencies are in agreement that India is the fastest growing major economy in the world."It is a matter of pride for us that today global agencies like World Bank, IMF or any other rating agencies, everyone has unanimously agreed that India is progressing the fastest among the world's biggest economies," said Modi.