A group of leading economists and statisticians recently came together to express deep concerns about inconsistencies in India’s economic data reporting, particularly the methods used to calculate GDP. They emphasized the urgent need to reform the system to ensure that GDP estimates reflect the actual state of the economy. Without accurate data, they argued, policies based on those numbers are unlikely to be effective. One of the speakers, Sharma, stressed that reliable GDP figures are essential for sound policy decisions.

The event, titled GDP Base Revision: Time to Regain Confidence, was held at the India International Centre. It brought together prominent voices from India’s statistical and economic community, including NK Sharma, former Director General at the National Statistical Office (NSO); Sanjay Kumar, former Additional Director General at NSO; and Amey Sapre, an associate professor at the National Institute of Public Finance and Policy. The session was moderated by Siraj Hussain, former Union Secretary in the Ministry of Agriculture. Attendees included journalists, UPSC members, students, and even a retired officer from the National Sample Survey.

This discussion took place at a time when the Indian government is preparing to shift the GDP base year from 2011–12 to 2022–23. This revision is being overseen by a 26-member advisory committee and is expected to be completed by 2026. The goal is to make GDP estimates more accurate and better aligned with changes in the economy, as well as to bring them closer to global standards.

One of the key points of concern raised during the discussion was the calculation of GDP in the public administration sector. Sharma pointed out that after adjusting for inflation, the real GDP of public administration had shown a surprising 77 percent growth over time. This was seen as unusually high, especially given that employment levels in government services have remained largely stable. Sapre noted that such a large increase doesn't align with expected annual growth rates of 6 to 7 percent and steady employment figures.

Kumar added that official data on government employment has not been clearly reported since 2011–12, which adds to the difficulty of verifying such figures. He also noted broader issues with data classification and reliability. Sharma referred to the 74th round of the NSSO survey, where a significant number of businesses were either misclassified or could not be located at their registered addresses. These errors make it harder to trust the estimates being used in GDP calculations.

Another critical issue discussed was the method used to adjust GDP figures for inflation. Kumar explained that different types of price indices are used to calculate growth at constant and current prices. Ideally, these should follow similar trends after adjusting for inflation. However, he pointed out that in practice, these figures often diverge significantly, suggesting flaws in the methodology.

The panel also questioned the assumptions behind how services are measured. For instance, vehicle repair services are currently linked to new vehicle sales, but as Sharma explained, repairs are actually tied to the entire stock of vehicles in use, not just the new ones sold in a given year. This misalignment leads to unreliable estimates.

More broadly, the panelists argued that India’s statistical system may not be fully equipped to capture economic shocks or major transitions, especially in the unorganised sector. Sapre pointed out that using data from the organised sector to estimate growth in the unorganised sector assumes that both behave similarly, which is not the case. Kumar added that in trade, for example, unorganised sector growth is estimated at 10 to 11 percent annually at current prices, but household survey data suggests much lower figures—sometimes as low as 3 percent.

The inconsistencies extend further. In the case of own-account enterprises—small businesses without hired workers—gross value added per worker has actually declined, which contradicts the high growth rates shown in national accounts. Similarly, the communication sector in the unorganised space is shown as growing faster than the organised sector, even though entities like PCOs and internet cafés have virtually disappeared since 2011–12, shrinking from 2 million units to just 30,000.

Disclaimer:This image is taken from ThePrint.