New GDP numbers based on scientific methodology: Panagariya

Brushing aside criticism against new GDP numbers, Vice—Chairman of NITI Aayog Arvind Panagariya has said they are based on scientific methodology and there are no compelling objections against the new series of National Accounts.

“Scientifically speaking, we can’t reject a change that is methodologically sound just because the outcome it produces fails to agree with our intuition. In such circumstances, we must critically examine our own intuition,” Panagariya said in an interview to PTI.

The Central Statistics Office (CSO) had adopted the new series of National Accounts with 2011—12 as base year and subsequently revised the Gross Domestic Product (GDP) growth rate to 6.9 per cent in 2013—14 from 4.7 per cent and 5.1 in 2012—13 from 4.5 per cent.

It CSO has estimated economic growth at 7.3 per cent for 2014—15, slightly lower than its earlier advance estimate of 7.4 per cent.

Several domestic and global experts as also RBI Governor Raghuram Rajan and Chief Economic Advisor Arvind Subramanian had raised doubts about the accuracy of the new series. Even the Parliamentary Standing Committee on Finance was not convinced about the new growth projections.

“I am puzzled as I said because the fact that..., especially what happened in 2013—14, that number is puzzling because that is a kind of bad year, yet growth accelerated,” Subramanian had said in February.

“We do need to spend more time to understanding the GDP numbers,” Rajan had said on February 3 after releasing the bi—monthly monetary policy of the central bank that retained the forecast of 5.5 per cent GDP (based on old method) growth in 2014—15.

When asked about the controversy, Panagariya said: “The question we must ask is whether the new data sources used and methodological changes made by the new series represent an improvement over the past practice. Consensus view is that they do — at least I have not heard any compelling objections.”

Elaborating further, he said that the other way to look at the new data is to see the level of nominal GDP in the new series which is not hugely different from that under the old series.

“It is the GDP deflater that is lower in the new series kicking up the real growth rate despite minimal movement in the nominal numbers vis—is the old series. And that may well be because the weight of the WPI, which has risen rather slowly, is larger in the new series,” he added.