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Context: Three years after the shift to the new base year of 2011-12, the CSO and NITI Aayog jointly released the back series GDP data detailing growth numbers for 2004-05 to 2011-12.
GDP calculation process and Central Statistical Office
Introduction of GVA at basic prices in India
- In India, GDP is estimated by Central Statistical Office (CSO).
- Under the Fiscal Responsibility and Budget Management Act 2003 and Rules thereunder, Ministry of Finance uses the GDP numbers (at current prices) to peg the fiscal targets.
- For this purpose, Ministry of Finance makes their own projections about GDP for the coming two years while specifying future fiscal targets.
- In the revision of National Accounts statistics done by Central Statistical Organization (CSO) in January 2015, it was decided that sector-wise wise estimates of Gross Value Added (GVA) will now be given at basic prices instead of factor cost.
- In simple terms, for any commodity the basic price is the amount receivable by the producer from the purchaser for a unit of a product minus any tax on the product plus any subsidy on the product.
- However, GVA at basic prices will include production taxes and exclude production subsidies available on the commodity.
- On the other hand, GVA at factor cost includes no taxes and excludes no subsidies and GDP at market prices include both production and product taxes and excludes both production and product subsidies.
GVA at factor cost + (Production taxes less Production subsidies) = GVA at basic prices
GDP at market prices = GVA at basic prices + Product taxes- Product subsidies
| Why back series adjustment needed? | ● Get a better assessment of growth trend ● Allow better comparison and forecasts ● Adjust for better methodology and data |
|---|---|
| How is the new series better? | ● Follows globally accepted methods ● Better coverage of economic growth |
| What the new data shows? | ● Growth trend does not change much ● Global financial meltdown impacted economy more than anticipated ● Large decline in investment rate stands out |
| Use of latest data sources | ● Use of MCA-21 database ● New series of WPI and CPI in lieu of CPI-AL/IW |
| Improvement in coverage | ● Inclusion of stock brokers, stock exchanges, asset management companies, addition of mutual funds and pension funds, regulatory bodies like SEBI, PFRDA, IRDA included in financial sector ● Use of sector specific CPIs used (health, education, transport and communication) |
| Implementation of International Guidelines | ● Estimation by different institutional sectors- Non-financial and financial corporations, general government and households, Distinction between general government and public corporations ● Valuation of GVA at basic prices ● R&D expenses treated as part of capital formation |
Difference between GDP and GVA
| Social Forestry | Agro-forestry |
|---|---|
| • It is forestry outside conventional forests, which primarily aims at providing continuous flow of goods and services for the needs of local people. | • Agroforestry is the management and integration of trees, crops and/or livestock on the same plot of land. |
| • Social forestry was first recognized as an important component of forestry development in the Interim Report of the National Commission on Agriculture 1976 and later in National Forest Policy 1988. | • It combines agriculture and forestry by planting viable tree shelter belts along agricultural lands. |
| • Objectives: To organize local communities in their struggle for socio-economic development and to integrate economic gains in the distribution of their benefits to the rural society. | • It is dynamic, ecologically based, natural resource management system that diversifies and sustains production in order to increase social, economic and environmental benefits for land users. |
| • It includes raising wind breaks on dry farm lands, planting trees along roadsides, planting in village common lands and waste lands, planting along railway lines and canal banks, planting on common community lands like religious places, educational areas and panchayat lands etc. | • Agroforestry is derived from concept of ecology and places an emphasis on interaction between different plant species. Agroforestry results in higher overall yields and reduced operational costs. In the Tarai area of Uttar Pradesh, Taungya cultivators harvested higher yields of crops such as maize, wheat, pulses etc. without fertilizer. |
| • Benefits of social forestry include: o Fuel, fodder, timber, supplementary food and income from surplus forest products and tree derived resources for rural people. o Form villagers into a well-knit community and increased social cohesion. o Reclamation of waste lands and degraded lands along with soil conservation and green cover. o Protection of agricultural fields from winds and dust storms. o Check desertification. | • Benefits of agroforestry: o Maintain soil organic matter and biological activity at levels satisfactory for soil fertility. o Control runoff and soil erosion and maintains required soil moisture. o Maintain more favorable soil physical properties than agriculture, through organic matter maintenance and the effects of tree roots. o More closed nutrient cycling than agriculture and hence to more efficient use of nutrients. o Nitrogen-fixing trees and shrubs can substantially increase nitrogen inputs to agro forestry systems. o Decomposition of tree and pruning can substantially contribute to maintenance of soil fertility. o Helps in income diversification thereby reducing agricultural dependency of farmers. |
Why back series data and its important?
- The back series provides historical data for GDP from 2004-05 to 2010-11 using 2011-12 as the base year.
- The purpose for such a back series is to ensure the old GDP data and the new are comparable.
Base year and its significance
- The base year of the national accounts is the year chosen to enable inter-year comparisons.
- It is changed periodically to factor in structural changes in the economy and present a more realistic picture of macroeconomic aggregates.
- The new series changes the base to 2011-12 from 2004-05.
- The base year is important in GDP calculation as factors such as purchasing power and enables calculation of inflation-adjusted growth estimates.
- To depict a better picture of the economy through macroeconomic aggregates like Gross Domestic Product (GDP), National Income, consumption expenditure and other related aggregates and indicators.
What is the issue?
The GDP back series data released jointly by CSO and NITI Aayog contradicts the earlier findings of a committee set up by National Statistical Commission to develop a methodology for deriving back data by linking the old series with the new base year of 2011-12.
| Nutrition related schemes | Features |
|---|---|
| Integrated Child Development Scheme (ICDS) | Non-formal preschool education, growth monitoring, supplementary nutrition, health and nutrition education for caregivers |
| Mid-day meal scheme (MDM) | Meal to school children with an aim to enhance enrollment, attendance and improve nutritional status |
| National Food Security Act, 2013 | 75% rural and 50% of the urban population entitled to 5 kg of food grains; rice, wheat and millets at Rs3, Rs2 and Rs1/kg respectively; 600 calories of take home ration for P&LW. |
| Zero Hunger Programme, 2017 | Organising farming systems for nutrition; set up genetic gardens for bio-fortified plants/crops; Initiate Zero hunger training |
| National Nutrition Mission or POSHAN Abhiyan | It strives to reduce the level of stunting (by 2% a year), undernutrition (by 2% a year),anaemia(3% a year) and low birth weight babies (by 2% a year). National Nutrition Mission reflects an amalgamation of scientific principles, political fortitude and technical ingenuity. It highlights a strong focus on convergent actions from the national to the village level. |
| Pradhan MantriMatruVandanaYojana | It is a maternity benefit program with main focus on immunization of P&LW. Ensuring proper nutrition to mother and children. Financial assistance of Rs. 6000. |
| Convergence of various ministries under NNM | Ministry of Women and Child Development- ● Anganwadi services ● Pm MatruVandanaYojana ● Scheme for Adolescent Girls Ministry of Health and Family Welfare- ● JananiSurakshaYojana ● National Health Mission Ministry of Drinking Water and Sanitation- Swachh Bharat Mission Ministry of Rural Development- ● Mahatma Gandhi National Rural Employment Guarantee Scheme ● Construction of AnganwadiCentres (AWCs) Ministry of Consumer Affairs, Food and Public Distribution- Public Distribution System Ministry of Panchayati Raj- Mobilisation of Gram Panchayats towards Convergence Ministry of Information & Broadcasting Ministry of Tribal Affairs Dept. of School Education and Literacy, HRD Ministry of Urban development |
| Kilkari | Audio messages about pregnancy, childcare, child birth sent to expecting mothers across the nation |
| National Nutritional Atlas | The Nutrition Atlas has been developed as a ready reckoner to provide all the data and vital statistics on nutrition for the entire country in a synchronized manner at a click of a button. |
| National Nutrition Week | The basic objective of this annual event is to intensify awareness generation on the importance of nutrition for health which has an impact on development, productivity, economic growth and ultimately National development. |
| Food fortification | ● Food Fortification is age old, cost effective intervention to address micronutrient deficiencies. ● Indian government has announced that 118 districts in the country will receive fortified rations, in its attempt to fight widespread malnutrition, especially among women and children. ● These rations will come in the form of wheat and rice enriched with vitamins and supplements. ● This is the measure taken under National Nutrition Mission. ● The two main nutrients that will be added to the food grains supplied by PDS are iron and folic acid. |
Back series data released by CSO and NITI aayog
| Advantages | Disadvantages |
|---|---|
| 1. Provides stability to the government by preventing shifts of by preventing shifts of party allegiance. | 1. By preventing parliamentarians from changing parties, it reduces the accountability of the government to the Parliament and the people. |
| 2. Ensures that candidates elected with party support and on basis of party manifestoes remain loyal to the party policies. Also promotes party discipline. | 2. Interferes with the member’s freedom of speech expression by curbing dissent against party policies. |
What is the controversy?
- No explanation for using new datasets- There is not enough explanation for the choice of datasets and proxies, especially those datasets that didn’t exist before 2011-12.
- MCA data not available before– For instance, for years preceding 2006, when the MCA-21 database did not exist, the CSO has used ASI data for estimating manufacturing growth whereas economists say there could have been other indicators for the same metric.
- Criticism over the role of NITI Aayog- The role of the NITI Aayog in the release of the statistical exercise of CSO, which comes under Ministry of Statistics and Programme Implementation (MoSPI), has also been questioned.
- Volume index approach v/s financial data approach (GVA based approach)- The System of National Accounts prefers to go with volume indices. The big difference between the volume index approach and the financial data approach is that the financial data captures changes in quality(as it is balance sheet based) which the volume approach does not.
- Timing of data release- With ongoing assembly elections and general elections due in 6 months timing of such exercise is not taken well.
Way forward
- Sustainable Investment- The GDP data controversy runs the risk of denting the market’s trust and conviction in official data released by government agencies. This can affect incoming investment in the country.
- Institutional autonomy- Organisations such as CSO, must not be politicized for institutional damage have prolong adverse ramifications.
- Political overtones- During phase of elections in specific and otherwise in general, politicians must be mindful of such exercises and its consequences. As it is well known that “If you torturethe data long enough, it will confess to anything”.
- Subjectivity should be reduced – Since there is a debate among experts over data/indicators used, there must be thus framed set of measures through effective deliberations to reduce the subjectivity involved.
- External Scrutiny:The CSO should be open to submit the methodology used and giving data to a review of independent experts to prove the credibility of the exercise.
- GDP is only one of the methods to measure economic growth– Being a demographic dividend nation, the country needs to look at other data like creation of jobs in the economy, how growth translated into inclusive growth, human development, care economy and happiness levels among others.
