The truth behind India’s new GDP numbers (Live Mint)

The key to understanding what is wrong seems to lie in the manner in which estimates for the private corporate sector were computed by the Central Statistical Office (CSO). It is an open secret that India’s new gross domestic product (GDP) series has flummoxed most observers of the Indian economy. The new numbers seem completely out of sync with other economic indicators such as the revenue growth of listed firms and bank credit growth. Reserve Bank of India (RBI) governor Raghuram Rajan and the chief economic adviser to the finance ministry Arvind Subramanian have publicly expressed scepticism about the new growth numbers. The key to understanding what is wrong seems to lie in the manner in which estimates for the private corporate sector were computed by the Central Statistical Office (CSO), India’s top statistical body. The final methodology adopted by CSO differed significantly from what was agreed upon by a committee it had appointed, which included independent experts. As in the case of other sectors of the economy, the estimates of the private corporate sector are based on the report of a sub-committee which examined the new methodology to estimate output. But the version of the sub-committee report published by CSO last month differs dramatically from the original report finalized by the sub-committee in September 2014, according to a recent Economic and Political Weekly article by R. Nagaraj, an independent member of the sub-committee and a professor at the Indira Gandhi Institute of Development Research in Mumbai. As the chart below shows, the difference between the gross value added in manufacturing between the two versions of the sub-committee report is as high as 108%. The difference in the estimate of non-financial private corporate sector savings between the two versions of the sub-committee report is still higher at 257%. According to Ashish Kumar, director general, CSO, the revisions to the original estimates were based on methodological changes suggested by 

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