Defending India's GDP: CEA Nageswaran's Insights

In a recent workshop organized by the Ministry of Statistics and Programme Implementation, Chief Economic Advisor (CEA) V Anantha Nageswaran defended India's GDP data against critics. He emphasized the importance of balanced evaluations of economic performance, suggesting that criticisms often arise selectively, primarily when growth figures exceed expectations. Nageswaran pointed out that during the significant contraction of 25% in April-June 2020, there were no major complaints about the methodology or reliability of the numbers.

Nageswaran highlighted that the current GDP growth rate, which showed an impressive 8.2% in July-September, has faced skepticism from economists who argue that the growth figures may be overstated. He specifically mentioned the use of the single-deflator method, which can inflate the gross value added (GVA) figures under certain conditions. This method raises concerns when the prices of inputs do not align with the final prices of goods and services, leading to discrepancies in the reported growth rates.

Further, he noted that while there were complaints about the single-deflator method when wholesale inflation was high in FY22 and FY23, similar concerns were not raised during periods of lower inflation. Nageswaran explained that a hypothetical price deflator for the services sector indicated that discrepancies in growth reporting were minimal, suggesting that the GDP data was not significantly overstating growth.

He criticized the tendency to question India's statistical methods more than those used by developed countries. Nageswaran argued that while every estimation methodology has its flaws, there is an apparent bias against Indian methods. He called for a change in mindset, encouraging a more mature evaluation of data and its critique. He urged critics to recognize the consistent and transparent nature of the data provided by the Ministry of Statistics, which reflects the true picture of the economy.

Nageswaran also addressed the challenges in measuring the informal sector in India. He stated that there is no uniform definition for the informal sector, leading to potential overestimations. Many Indian businesses operate as sole proprietorships or small partnerships without separate accounting for personal and professional finances. He believes this contributes to the inflated perceptions of informality within the economy.

In conclusion, Nageswaran's remarks underscore the importance of a balanced and informed critique of economic data, advocating for transparency and credibility in India's statistical practices. He emphasized that if outsiders can replicate the data, trust in the figures will increase, and any remaining skepticism will be part of the critic's nature.