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The Ministry of Statistics and Programme Implementation (MoSPI) is likely to reject Parliament Standing Committee on Finance’s recommendation that the base year for national accounts be revised annually instead of every five years. Revising them annually is being seen as unfeasible.
In its report on MoSPI, submitted to Parliament last week, the panel had said since that the changes in the national accounts and the sudden jump in India’s gross domestic product (GDP) projections have come about due to change in the base year from 2004-05 to 2011-12 and due to change in the system of accounting from cost to market price, “there should be a linear way of working out these variations rather than doing it at an interval of five years or more.”
“The committee, therefore, recommends the ministry to examine the possibility of revising the national accounts annually to pre-empt the kind of controversies and debates that are being generated right now,” the report states. The committee is headed by former petroleum and natural gas minister M Veerappa Moily, and includes former prime minister Manmohan Singh.
Business Standard has learnt from government sources that MoSPI is already preparing an ‘action taken’ report in which it is likely to state that the changes in base year or accounting methods to reflect the latest trends cannot be done every financial year, nor can some of the input data for GDP be gathered annually, as some of the data comes from surveys which are typically carried out once every five years.
“The National Sample Survey (NSS) on employment and unemployment are carried out once every five years. This is just one example of the key input which is required to compile GDP data and projections. Similar is the case for the enterprise survey. Not all of them can be carried out on an annual basis,” said a senior government official. The ‘action taken’ report is likely to be submitted in a month.
The official added that speeding up some of the surveys to make information annually available would mean compromising with the size and composition of the samples.
The new methodology of calculating GDP has come under heavy criticism from economists and policy watchers, who say that the headline numbers do not add up from various standalone data, including the Index of Industrial Production (IIP).
“The committee members are of the view that the new series of national accounts with 2011-12 as the base year has raised more questions than answers. On the question of slow growth in production volumes regardless of whether value addition has increased or not, the ministry in their written reply have done little to allay the concerns of the committee,” the report states.
The new series has raised economic growth in 2012-13 to 5.1 per cent from 4.5 per cent under the older series, and to 6.9 per cent from 4.7 per cent for 2013-14.
"The reply of the ministry regarding authenticity and credibility of the new series is also vague... The committee is not convinced regarding the credibility of the figures, which are showing a sudden jump in the growth rate of various sectors of the economy including GDP growth rate from 1 per cent to 1.5 per cent, Capital formation from -3 per cent to +3 per cent, etc., which seem to contradict anecdotal evidence," it says.
