The government today admitted there were mistakes in the gross domestic product (GDP) data released yesterday and issued a correction to the first quarter demand-side numbers.
Overall economic growth, measured at factor cost, was however retained at 8.8 per cent during the quarter ended June.
“Inadvertently, there have been use of inappropriate deflators in converting ‘Quarterly estimates of expenditures of GDP at market prices in Q1 (April-June) of 2010-11 (at current prices)’ to ‘Quarterly estimates of expenditures of GDP at market prices in Q1 (April-June) of 2010-11 (at 2004-05 prices),” the ministry of statistics and programme implementation said in a late-evening statement, hours after admitting there were discrepancies in the numbers released yesterday afternoon.
Growth revision
Following the changes, GDP growth at market or 2004-05 prices was revised to 10.02 per cent, as against 3.66 per cent estimated earlier (see table).
While calculating GDP at market prices, the government uses 2010-11 data, which it has to deflate to 2004-05 prices, using the inflation parameters. GDP at factor cost or national income by type of income is a measure of national income based on the cost of factors of production, instead of market prices. This allows the impact of any subsidy or indirect taxes to be removed from the final figures. GDP at market prices includes indirect tax and subsidy provided by the government.
In a note, Nomura India economist Sonal Verma said the GDP deflator for market price was assumed at 20.4 per cent, but for factor cost it was 11.8 per cent. Except for the quarter ended June, the two deflators have historically moved in tandem. “In our view, since WPI (wholesale price index-based) and CPI (consumer price index-based) inflation averaged 11 per cent and 13.7 per cent, respectively, the deflator assumed for estimating GDP at factor cost is the more accurate one,” she said. For calculating GDP at factor cost, the government uses the WPI data, while it uses CPI for calculating GDP at market price.
A ministry official said the deflators used were because of a combination of factors but did not explain the reasons.
In addition, the export and import numbers were corrected in the statement issued this evening, which officials attributed to tabulation errors.
On account of yesterday’s error, there was a five percentage point difference between the GDP numbers at factor cost (8.8 per cent) and at market prices (3.7 per cent).
Economists said the revised data once again shows the momentum in domestic demand had not weakened by as much as the expenditure-based measure of GDP had suggested.
The earlier numbers indicated government subsidy had increased during the quarter, with significant decline in indirect tax collection. However, data from government departments painted a different picture, as indirect tax collections had gone up by 40 per cent during the first quarter and, even after using the deflator, a decline could not be explained. Similarly, with the government trying to prune subsidies, an increase in share of subsidies in the GDP was seen to be unlikely.
One-Off
Government officials, however, maintained that the mistakes did not affect the credibility of data. "CSO (the Central Statistical Organisation) corrects the figure sometimes because they are on the basis of random surveys. Therefore, there are some errors here and there and the revised figures will be given," finance minister Pranab Mukherjee said on the sidelines of a conference in Mumbai.
| TRACKS CHANGE, FINISH LINE SAME Comparison of gdp data issued by the government yesterday and today | ||||||
| Earlier | Now | |||||
| 2009-10 | 2010-11 | % change | 2009-10 | 2010-11 | % change | |
| Private final consumption expenditure | 658856 | 661123 | 0.34 | 658856 | 683794 | 3.79 |
| Government final consumption expenditure | 126171 | 125425 | -0.59 | 126171 | 144087 | 14.20 |
| Gross fixed capital formation | 342912 | 355452 | 3.66 | 342912 | 369035 | 7.62 |
| Change in stocks | 14449 | 15125 | 4.68 | 14449 | 15460 | 7.00 |
| Valuables | 12938 | 18251 | 41.07 | 12938 | 14879 | 15.00 |
| Exports | 234311 | 224162 | -4.33 | 233380 | 246633 | 5.68 |
| Imports | 287112 | 281763 | -1.86 | 285971 | 310009 | 8.41 |
| Discrepancies | -2872 | 22092 | N.A. | -3082 | 46009 | N.A. |
| GDP at market prices | 1099653 | 1139867 | 3.66 | 1099653 | 1209888 | 10.02 |
| Amount in ' cr, change in % Note: GDP growth at factor cost remains unchanged at 8.8 per cent ‘Earlier’ refers to numbers released on Tuesday; ‘now’ refers to revised data issued on Wednesday Source: Ministry of Statistics & Programme Implementation | ||||||
“Some criticism has been made that projections from the demand side are not matching with the growth projection. That will have to be examined,” he said, while sticking to the 8.5-8.7 per cent GDP growth estimate.
“Such things might happen sometimes. The figure on the demand side is coming closer to the 8.8 per cent stated in the constant prices parameter,” said S K Das, director general, Central Statistical Organisation, the agency which collates the data for national accounts.
