‘Back series data based on global practice’

We need to work hard to achieve double-digit growth, says the Vice-Chairman of NITI Aayog The new RBI Governor will be much better as he is more of a team player and displays greater maturity, NITI Aayog Vice- Chairman Rajiv Kumar explains in an interview. He also, for the first time, explains why the Aayog got involved in the back series GDP calculations. Excerpts: The RBI and the government have been in a public stand-off for almost three months… I think that was completely unnecessary. Everybody is part of the macro management team of the country. There are always differences in the manner any two economists look at the economy and that is expected. But you resolve your differences through discussions that are kept within the team, and come to some understanding. This is where I think the new Governor will be much better. He has a lot more roundedness and a lot more maturity in him. Why was NITI Aayog included in the back series GDP data estimation process? We have been waiting for the back series data since 2015. Then came the Mundle Committee report for which estimating the back series was not a part of their mandate, but they did it. The committee was on recommending the set statistics for the real sector of the economy. They compiled a fairly simplistic econometric model where the general feeling was that it was not satisfactory and the government did not accept those findings. That, I am assuming, brought pressure on the CSO (Central Statistics Office) to come out with their version of the ‘back series.’ They came to NITI Aayog and asked us to have a look at the output. I agreed, and said rather than just me looking at it, why don’t we ask this to be looked at by a group of statisticians, to which they agreed. We got a first meeting organised where 8-9 of the best statisticians came and there were some issues that were raised. We had already called a press conference and then, we cancelled it because we felt that the back series was not yet ready. Then NITI Aayog organised another round table about a month later. We discussed the final results and the statisticians endorsed it. Having been involved, CSO asked NITI if the report could be released together. I agreed. I hadn’t realised the possibility of any of this political drama at the time. One of the criticisms of NITI Aayog’s involvement is that it put in doubt the method chosen for calculation of the back series The method that was chosen, and the statisticians made sure of that, was the method recommended by the UN System of National Accounts (SNA) 2008, and that’s the standard global practice. How can anybody argue otherwise? If there were political motivations, then why would the CSO release the Q2 growth data, which showed slower growth than Q1, just three days after the back series? The new data show we never grew above 9% in the last decade or so. Does this mean we have to re-evaluate our view of what the economy was like? I strongly think so. We need to accept that we need to work much harder to get to those magic numbers of double or even near double-digit growth. It has been said several times before, including by the then Chief Statistician of India T.C.A. Anant, that there was a significant overestimation of the rate of growth of the services sector, which is why the sector’s share in the GDP and its growth had been exaggerated. There are three sub-sectors where this happened most: communications, financial services and unorganised trade. Some of it you can see very clearly. For example, telecom. First the growth in the number of subscribers was taken as a proxy for the growth of value-added in the sector. It was not value-added. Instead, what should have been done was looking at either revenue receipts or at least the number of data or voice minutes used for estimating growth. This is what they are doing now in the new series. So that showed a sudden drop. Then, the RBI was being treated as a market entity. The SNA 2008 says that the RBI should not be treated as a market entity so that only the costs should enter the accounting and not all the profits that they make. Earlier, all the dividends that they paid to the government came into the calculation. This change also led to a huge drop in the new estimates of service sector growth.

Source : https://www.thehindu.com/todays-paper/tp-business/back-series-data-based-on-global-practice/article25760069.ece

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