NSSO report on GDP data divides opinion, provides ammo to Opposition

A National Sample Survey Office’s (NSSO’s) report revealing that one-third of the companies on the MCA 21 portal — used to calculate GDP data in the new series — are untraceable has left experts divided and provided ammunition to the Opposition to question the government on the accuracy of the economic data. 

 In ‘Technical Report on Services Sector Enterprises in India’, the NSSO said 21 per cent firms on the portal were found to be out of coverage and another 12 per cent were non-traceable. Active companies are the ones that file statutory returns at least once in three years. 

The portal is used to calculate around 45 per cent of services that go into gross domestic product (GDP) data. 

 The government sought to downplay the issue, saying there was no impact on the existing GDP/GVA estimates for the corporate sector "as due care is taken to appropriately adjust the corporate filings at the aggregate level based on the paid-up capital". The findings of the NSSO report would be examined before finalising the methodology for the next revision of the GDP series, the Ministry of Statistics and Programme Implementation (MoSPI) said in a statement. The ministry will also come up with a national business register, which would be used for GDP calculation. 

Some experts echoed the government's view, saying GDP data was not undermined as every transaction in the economy had to be factored in. Others criticised the inclusion of “shell companies data” in the measurement of the GDP, arguing they didn't produce anything. The issue also took political overtones as the Opposition slammed the government for “overestimating” the data. 

“...If I don't include these shell companies in GDP calculation, then we are not capturing all transactions in the economy," former chief statistician Pronab Sen told Business Standard. He said if a legitimate company was using a benami company to hide part of its transactions, then those transactions were part of the GDP. "If we don't measure that, then we would be systematically underestimating the GDP,” Sen said.

However, R Nagraj, professor at Indira Gandhi Institute of Development Research, said a large proportion of inactive companies didn't really produce any goods and services on a regular basis, and as such should not be included in GDP data.

“Various investigations have shown that there are many shell companies. As they are not producing any goods and services, they may be serving a private interest of a large corporate, and should not be included in GDP calculations. If you use data of these companies, then we will get an overestimate,” he said.

According to the Ministry of Corporate Affairs, there are around a million active companies, he said. “Now, in the CSO's various discussions, it has been revealed that they consider active companies to be those which have filed their returns at least once in the last three years. But if that was the case, then in the last few years at least once they should have data for 700,000-800,000 companies, which does not seem to be the case," Nagraj said. 

The CSO claims that it deals with around 300,000 companies. "In the data that is supplied by the MCA to the RBI, the number of companies has never been more than 250,000-300,000 in the past few years. So the notion that we have around 1 million active companies that are really producing goods and services on a regular basis appears fiction to me," said Nagraj.

P C Mohanan, former chairman of the National Statistical Commission (NSC), said it was not a very alarming kind of situation. "Whenever you look into government figures, there will be a lot of inaccuracies on the face of it, because most people do not update their details in the government records. We change address, but never bother to update our car driving licence or car registry, etc. So here too, there are cases like you started a company, you moved to a different building, but didn't correct address."

He said the CSO would have seen all this and already made certain adjustments for non-response or if the company activity was different. 

At a press conference, former finance minister P Chidambaram said, "The NSSO revelations have blown a huge hole in the growth figures put out by the CSO. It turns out that the government has been using bogus data. The CSO growth figures are a sham. The CSO's complicity in putting out false data is a scam."  

Samajwadi Party President Akhilesh Yadav tweeted that the new government would have to fix the economic mess created in the past five years.

MoSPI said the ministry was embarking on the seventh economic census for all economic establishments with an aim to not only assess the nature and distribution of establishments but also to form a national business register which could be periodically updated. "This will greatly facilitate future establishment surveys undertaken by the central and state governments," it said, adding that fieldwork for the economic census was slated to commence in June. 

A recent report by the Department of Economic Affairs had also given ammunition to the Opposition against the government. The report had admitted that there was a slowdown in the economic growth in 2018-19. The growth is projected to have slowed down to 7 per cent in 2018-19, the lowest under the Modi government, according to the second advance estimates. The services sector growth fell to 7.4 per cent from 8.07 per cent in the previous year.