NSSO discovers holes in new GDP series

NEW DELHI, MAY 8 (AGENCIES) | Publish Date: 5/8/2019 11:49:59 AM IST

A key database introduced in India’s new gross domestic product (GDP) series has now been found to be full of holes, raising fresh questions over the controversial and contested GDP numbers in Asia’s third-largest economy, reports Mint, business news publication.

A study conducted by the National Sample Survey Office (NSSO) in the 12 months ended June 2017 and released last week has found that as much as 36% of companies that are part of MCA-21 database of companies and are used in India’s GDP calculations could not be traced or were wrongly classified.

The results were so disappointing that two detailed reports based on the survey had to be junked. It is worth noting that these companies were deemed as “active companies” by the ministry of corporate affairs (MCA), which includes any company that has filed returns at least once in the past three years on its list of active firms. Statisticians say the use of the untested database in national accounts also raises troubling questions about the decline of the Central Statistics Office (CSO), which was once a globally renowned institution, and the reliability of India’s official statistics.

“This is a devastating blow for CSO,” said R. Nagaraj, a professor at Indira Gandhi Institute of Development Research in Mumbai. “Some of us had repeatedly asked CSO officials to verify the MCA-21 numbers before using them in national accounts, but they finalized the new series without adequate scrutiny and debate.”

The key change in new GDP series launched in 2015 was the use of MCA-21, which CSO sourced from MCA. Even at the time it was being introduced in national accounts calculations, several economists had raised questions on this issue. 

Critics argued that database includes many fictitious or shell firms that exist only on paper. They also said the methodology used to plug in MCA-21 numbers in the national accounts tends to lend an overestimation bias in GDP numbers. They demanded MCA-21 data be released to researchers and the public so the unit-level data could be examined. Even those who thought new GDP series represented a great methodological leap by CSO made the same demand.

So far, India’s national accounts statisticians at CSO have defended use of the new database although they stopped short of making it public. But now, their own colleagues from NSSO have warned about the presence of a large number of ghost firms in the database.

NSSO got into the act while carrying out a survey on service sector (74th round), supposed to be a first-of-its-kind survey on the service sector. MCA-21 database was used as part of sampling frame for the survey as it had addresses and other details of firms. Business registers in states that had such registers and data from last economic census were the other parts of the sampling frame. This survey strategy was approved by National Statistical Commission (NSC) two years ago, and later even a tabulation plan for two reports that were to be generated on the basis of this survey was approved by it.


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