india

Updated: May 28, 2019 07:17 IST

The National Democratic Alliance government plans ro revamp the country’s macro-economic statistical system, including barometers used to calculate growth and industrial output as well as create a new database of businesses.

The series of updates is expected to account for changes in the economy over time and boost data, an official said, adding some of it was overdue. But, the exercise will invite public scrutiny, some analysts said, given that past revisions to gross domestic product (GDP) figures have been mired in disputes.

The overhaul could potentially reveal new data for employment, value of goods produced and national incomes.

First, the government next month will kick off the 7th economic census, a mammoth exercise running through 2019-20 to reassess the “nature and distribution” of business establishments, sectors they serve and their core activities.

Second, based on this economic census, the government will also create a new database of business establishments, known as the national business register, covering a wider gamut of firms than is currently done. The existing Annual Survey of Industries typically covers only manufacturing units.

Third, the government is on course to shift the “base year” for calculating GDP from 2011-12 to 2017-18. A base year, which is a sort of starting point, is the first of a series of years to which a financial or an economic index (such as GDP) is pegged. This is done to account for changes in inflation, without which it is impossible to get the real value of national incomes.

The new base year will also apply to the index of industrial production, a key indicator of the pace of economic activity.

The UN’s System of National Accounts, which India follows, and the country’s own rules require the GDP base year to be shifted every five years to account for structural changes in the economy and a change in relative prices.

“What is really new is the attempt to create a national business register. If it works, data will become much more efficient,” said Pronab Sen, former chief statistician of India.

A previous attempt to compile a national business register had failed due to the complex nature of the task.

The real problem is to have census enumerators who are fully familiar with the classification and this needs intensive training of the country’s complex national industrial classification system. “Or else, you will again get a khichdi (mess),” Sen said.

In 2015, India started using a new base year (2011-12 from 2004-05) and method to calculate GDP, mainly switching to a market-price calculation of growth, which pulled up the country’s growth rate to just below China’s.

The introduction of a new database of firms (technically MCA-21) to calculate GDP has faced questions. The national business register should help cross verify the disputed MCA-21 database of firms, NR Bhanumurthy of the National Institute of Public Finance and Policy said . Bhanumurthy , who sat on a panel that recommended the register, however said the government should resist setting 2017-18 as the base year for the new GDP series. “Any base year has to be a normal year. 2017-18 in my view is not a normal year because there were shocks from the Goods and Services Tax and demonetisation too.”

In August 2018, the government released GDP data for the years between 2005-06 and 2011-12, known as “back-series” because it serves as a link between the old and new GDP series (resulting from a shift of the base year from 2004-05 to 2011-12).

The back series reversed the previous UPA government’s record of higher average growth than the Modi-led NDA. The government has also not endorsed a leaked unemployment survey report that found the joblessness rate to be at a 45-year high.

More recently, a national sample survey found the MCA-21 database of companies dodgy.

The government however has ruled out any distortions in GDP due to this. In a clarification issued on May 8, the government had said “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”.