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Henry Clay, an American politician, made use of the phrase “statistics are no substitute for judgment” to describe the use of data only to emphasise the fact without getting considerate about its relevance. However, this phrase is rightly applicable to the ongoing GDP estimation debate in India. The controversy mired up when barely six months prior to general elections in 2019, NITI Aayog and CSO (jointly contradicting earlier findings of the National Statistical Commission - NSC) released the latest GDP series which brought up that average growth during UPA years (2004-14) remained 6.8% whereas during NDA’s four years it remained 7.35%.

Vice-Chairman of NITI Aayog, Rajiv Kumar clarified that the Rs. 3 lakh crore difference in GDP figure for the base year 2011-12 was not adjusted properly by the NSC, when the base year was shifted from 2004-05 to 2011-12 which led to the disparity in GDP estimates. The damaging clarification besides putting integrity of Indian Statistical Services in jeopardy led the ruling party spokespersons to swing into action stating that it is just a draft report which used only one of the many methods offered to estimate GDP.

History testifies that to account for the economic activities that have accrued from the new sectors (may it be in primary, secondary or tertiary) which were not present in the previous GDP estimates, base year has to be changed.

Base year changes have taken place seven times in India i.e. in the year 1960-61, 1970-71, 1980-81, 1993-94, 1990-00, 2004-05 and 2011-12. Pertinently, the change that took place in 2011-12 on the recommendations of the United Nations System of National Accounts (SNA) to make India’s GDP growth numbers comparable with that of developed nations is considered to be the game changer. In all earlier changes, gross value added at factor cost was considered, but SNA insisted the use of estimates at market price.

A simple example can make it clear. Suppose a producer produced a table worth Rs. 100 by paying Rs. 25 each as rent, wages, interest and keeping the same amount as his profits. However, when the table is offered for sale, it is subjected to Rs. 20 as indirect tax and Rs. 10 as subsidy (net indirect tax being Rs. 10). Accounting for the production, indirect taxes and subsidies, the cost to the customer is Rs. 110. Thus, the price paid by the consumer is not the same as the revenue received by the producer owing to the taxes paid. The same problem erupted in case of the concordance between new and old base years as oldies did not fundamentally consider the taxes and subsidies. Accordingly, GDP growth during the UPA period that was 7.7% per year under the old series (2004-05) rose to 8% when the back-series was calculated in 2011-12. This issue was not fully resolved that a new problem of concordance has further been fuelled by Rajiv Kumar’s explanation which has led to inconsistent computation of GDP.

Even if NITI Aayog Vice Chairman’s judgment is believed, still statistics are far from reality. Basics of macroeconomics i.e. gross fixed capital formation, credit growth in the economy, exports or returns from Nifty and Sensex do not warrant that GDP growth in the last four years has outstripped the performance in UPA I and II. Precisely, during UPA’s reign (2004 to 2014), gross fixed capital formation (total investment) to GDP ratio averaged 33% whereas, GDP growth for the same time period averaged 6.8% (new series). How come with last four years’ gross fixed capital formation as percentage of GDP being 28.5%, the GDP growth has increased to 7.35% is beyond understanding. Appositely, we have also seen the investment deterrents in the form of demonetisation and GST in these four years.

Similarly, average annual growth in nonfood credit division remained 22% during UPA’s regime which touched an average low of 9.8% in the last four years. Of course, the banks may be reluctant to offer credit due to mounting NPAs, but does it mean that GDP growth will now take place without bank credit? Also, the exports and returns from share markets highlight that deeds remained low in the last four years or so. In light of these facts the timing of the release of new series raises doubts of it being an electoral trick rather than being a reality.

Obsession with higher GDP, may it be by UPA or NDA has not yielded any symbiotic outcomes for the economy. UPA’s high GDP growth based on loan waivers, excise and service tax cuts ultimately led to high inflation, depreciation of currency and fiscal indiscipline in the form of high fiscal and current account deficit in 2012 and 2013. Similarly, NDA’s high GDP growth, despite gaining tremendous momentum due to fall in the prices of crude oil, is on papers only with strategic sectors like banks, non-banking financial companies, aviation and telecom bleeding profusely. Statistically, the growth may be high or low, but its primary judgment should come from the number of jobs created in the economy.