GDP estimates relied on non-existent corporate data, say reports
09 May 2019
Reports that the National Sample Survey Office (NSSO) has found that 36 per cent of the companies taken into account for calculation of new GDP numbers are either untraceable or had been categorised wrongly has put a question mark on the reliability of GDP numbers.
There is a high probability that the country’s growth figures will decline if these “ghost” companies are removed from the data set.
This has rattled stock markets with the Sensex and the Nifty, the two key stock indices that ran up to new highs with the announcement of the polling dates in March, making a retreat. On Wednesday, the Sensex plunged 487.50 points to end at 37,789 and the Nifty fell 138.45 points to close at 11,359, respectively, after it was reported that the GDP numbers are questionable and may have to be revised down.
The recent exercise of the National Sample Survey to bring out a Technical Report on the Services Sector was commissioned by the Ministry to understand the data gaps and take remedial steps while undertaking the new base revision exercise for the proposed 2017-18 series. The results of this NSS Report will be further examined by the Advisory Committee before finalising the approach and methodology for the proposed 2017-18 series. It is emphasised that there is 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 corporate affairs ministry is also embarking on the 7th Economic Census for all economic establishments with an aim to not only assess the nature and distribution of establishments but to also form a National Business Register which can be periodically updated. This will greatly facilitate future establishment surveys undertaken by the central and state governments. The field work for the Economic Census is slated to commence in June, 2019.
India has also subscribed to the Special Data Dissemination Standards (SDDS) of International Monetary Fund (IMF) which requires that macro-economic data would be disseminated within the prescribed periodicity and timeliness conforming to the data standards laid down along with information on the detailed statistical practices or metadata. Accordingly, the Ministry has an Advance Release Calendar that gives the specific dates of release for the estimates.
Stock markets in India are coming to terms with the GDP figures based on dodgy corporate data. The recent news on economic and corporate fronts has also been negative and uninspiring.
But this is not the general view. While domestic investors go with this calculation, overseas fund managers, particularly those tracking the market technicals, say market fears are getting accentuated only because the Sensex is falling and that such talks will die down if the markets reverse their course.
Foreign institutional investors have pumped in more than Rs60,000 crore into stocks this year. But the pace had slowed down in the past couple of weeks as indices touched new highs and bad news started pouring in.
The estimation of GDP in any economy is a complex exercise where several measures and metrics are evolved to better measure the performance of the economy. For the purpose of global standardization and comparability, countries follow the System of National Accounts (SNA) evolved in the UN after elaborate consultation.
As with any international standard, the data requirements are immense and developing countries take time to evolve the various data sources before they can be aligned with the SNA requirements. In absence of data, alternate proxy sources or statistical surveys are used to estimate the contribution of various sectors to the GDP/GVA. The SNA also prescribes that the base year of the estimates may be revised at periodic intervals so that changes in the economic environment, advances in methodological research and the needs of users are appropriately captured.