India’s economic growth was revised upward to 6.9 per cent in financial year 2013-14 from an earlier 4.7 per cent on Friday after the government changed the formula to measure the economy by matching it with international standards.
The new formula will capture the total value of goods and services produced in informal and under-represented sectors, besides items like LED televisions and smartphones.
Data on informal and under-represented centres is now better captured by mining databases like Census 2011, National Sample Survey Organisation’s (NSSO) employment-unemployment, Consumer Expenditure Surveys for 2011-2012, the debt and Investment Survey of 2013, the Annual Survey of Industries (ASI) 2012-2013, and All India Livestock Census, 2012.
Earlier, GDP was calculated at factor cost, which measures market price without taking into account subsidies or indirect taxes.
But the global international practice is to calculate GDP at market price. So the government moved to this measure, along with revising the base year for calculating national accounts from 2004-05 to 2011-12.
The revision increased the size of the economy. For instance, the 2004-05 base year did not capture the production of LED TVs which did not exist at that time. It is hoped that the revision will help the government reach its fiscal deficit target of 4.1 per cent easily. The base year was last changed in 2010. The new methodology will cover more sectors and include more activities.
According to Statistics Commission Chairman Pronab Sen, moving to a new base year always gives a scientific calculation. With a new base year, one gets better data. “If you look for instances in the corporate sector, we were earlier going with the RBI forecast based on 2,500 corporates. This time round, we are using the MCA21 database which features five lakh companies as against the earlier 2,500,” Sen said.
With the new base year, the size of GDP changes mainly due to the inclusion of more up-to-date information in the compilation and estimation of national accounts. Addition of new goods and services increases the size of the GDP.
“This is one of the largest revisions in the national accounts done in the recent times,” the government’s chief statistician T C A Anant said.
After the change in the base year, the growth rate for FY 2012-13 was also revised upwards to 6.1 per cent from 4.5 per cent.
