India’s GDP

January 16, 2024

NEW DELHI – In the labyrinth of economic indicators, India’s Gross Domestic Product (GDP) emerges as a perplexing enigma, shrouded in a cloud of controversies and methodological intricacies. The saga begins with the introduction of the new GDP series based on 2011-12 data, which ignited a fervent debate over its accuracy and the motives behind its unveiling. The initial bone of contention lay in the absence of a back series when the new series was launched in 2015. Analysts raised eyebrows, questioning the validity of a methodology that seemingly obscured a comparative analysis between the UPA and NDA periods. The spectre of political influence loomed large, casting doubts on the transparency of the government’s economic narrative.

Fast forward to the pandemic-ridden 2020, when the economy witnessed its steepest decline since Independence. A swift recovery, touted as a testament to India’s resilience, raised eyebrows given the underlying issues in GDP calculation. The paradox deepens when we find the highest growth rate during the tumultuous demonetisation year, 2016- 17, revealing an alarming 8 per cent upward bias in GDP. This anomaly hints at a flawed methodology that overshadows the true state of the economy. Delving into the intricacies of GDP calculation, the quarterly estimates based on the production approach reveal a reliance on outdated benchmark indicators.

The last survey of unincorporated enterprises dates back to 2015-16, rendering the reference year obsolete in capturing the current economic reality. The extrapolation of annual figures from previous years raises a crucial question. How can accurate quarterly estimates emerge when the foundation itself is marred by errors and shocks?