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IMF to send a team this week to solve India’s GDP growth puzzle

In the new GDP calculation method, the CSO shifted the base year from 2004-05 to 2011-12.

Terming the recently revised gross domestic product (GDP) growth data of India released by the statistics ministry as “puzzling” and prima facie one with “discrepancies”, the International Monetary Fund (IMF) has said it will send a team of its statistics experts to New Delhi this week to better understand the new methodology of calculation and ensure the data is error-free.

The IMF will also be looking to obtain more ‘backcasted’ historical data in addition to ‘forecasted’ data on the basis of the new methodology used by the Central Statistics Office (CSO) so that they can find out India’s potential output and thereby forecast the country’s medium-term growth rate.

Paul Cashin, IMF Mission Chief for India, said: “We are seeing discrepancies or puzzles regarding some of the high frequency data. It has become a problem not just for us, but for the finance ministry, RBI and all entities using the data.”

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Besides, the IMF team will give its suggestions on the new Consumer Price Index (CPI)-based inflation data and the methodology of its calculation (base year was shifted from 2004-05 to 2011-12 and weightage of many food and non-food items were changed). The RBI has made CPI, instead of wholesale price index, the key factor in monetary policy decisions. In the new GDP calculation method, the CSO shifted the base year from 2004-05 to 2011-12. For making the country’s growth rates internationally comparable, the calculation was shifted from GDP at factor cost to GDP at market prices (to arrive at GDP at market prices from factor cost, indirect taxes —net of subsidies — are added). The new methodology includes gross value addition in goods and services.

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After the revision, the GDP in 2012-13 rose from 4.7 per cent to 5.1 per cent, while the 2013-14 data baffled many when the upward revision was huge — 6.9 per cent from 5 per cent. Manufacturing and financial sector data looked much better though the corresponding industrial output and bank credit data did not show such robustness. Incidentally, 2013-14 was a difficult fiscal which witnessed tight monetary policy and capital outflows. Besides, despite rising bad loans and several stalled projects in 2013-14, the new data showed increased private corporate investment. Growth in 2014-15 was pegged by CSO at 7.4 per cent.

Taking this data into account, the IMF projected India’s growth at 7.5 per cent both in 2015 and 2016 (up from 7.2 per cent in 2014). Cashin said the CSO had sought the IMF’s ‘technical assistance’ (TA), which, among other things, aims to improve India’s economic statistics.

However, he said the IMF is pleased that India has shifted to the ‘System of National Accounts (SNA) 2008’, ‘the latest version of the internationally accepted statistical standard for national accounts that helps in compiling measures of economic activity’.