6 hrs ago
MoSPI Defends Lower GDP Estimates With Better Informal-Sector Data
India changed how it calculates its GDP, which measures the size of the economy.
The new method gives more attention to small and informal businesses.
Earlier, some estimates for these businesses were extended using information from larger formal companies and other indicators.
New surveys now provide more direct information about informal businesses and workers.
This caused some earlier nominal GDP numbers to be revised downward.
MoSPI says this does not mean the old estimates were deliberately or systematically too high.
Some economists still question whether the informal economy is being measured fully.
MoSPI also says its new price measures are suitable for calculating real economic growth.
MoSPI Secretary Saurabh Garg attributed lower nominal GDP estimates mainly to improved measurement of the informal services sector.
The new series uses annual ASUSE data and monthly PLFS data instead of relying primarily on corporate or other proxies.
Garg said revisions do not mean the earlier 2011-12 series systematically overestimated GDP; estimates reflected the best data available at the time.
MoSPI defended using output PPI for double deflation, saying it aligns more closely with national-accounts principles than WPI.
Garg said the new GDP series incorporates the best available data, though critics have questioned informal-sector measurement, price data, and whether growth is felt on the ground.
- Who
- The Ministry of Statistics and Programme Implementation, represented by Secretary Saurabh Garg, and economists who have criticized aspects of the new GDP series.
- What
- MoSPI defended downward revisions to nominal GDP and explained its use of new informal-sector surveys and producer-price data.
- Where
- India.
- When
- The new 2022-23 base-year GDP series was released in February; the revisions cover overlapping years from 2022-23 to 2024-25 and subsequent quarters.
- Why
- MoSPI says better direct data on the informal sector and improved price measurement produced more empirically grounded estimates.
MoSPI’s Defense
Economists’ Concerns
Informal-sector measurement
MoSPI’s Defense
MoSPI says the new series uses direct evidence from ASUSE and PLFS and no longer relies on corporate proxies for current estimates.
Economists’ Concerns
Former Chief Economic Adviser Arvind Subramanian has questioned whether the GDP data properly captures the informal economy and has raised concerns about extrapolating listed-company performance.
Meaning of the downward revision
MoSPI’s Defense
Saurabh Garg says the earlier series was not necessarily an overestimate because it reflected the best available indicators at the time; later data enabled better estimates.
Economists’ Concerns
The downward revisions have prompted questions about whether the earlier methodology overstated economic activity, although the article does not establish that this was a systematic bias.
Use of producer prices
MoSPI’s Defense
MoSPI says output PPI was evaluated before its official launch, broadly tracks the legacy WPI, and is conceptually better suited to national accounts and double deflation.
Economists’ Concerns
Pronab Sen raised questions about whether appropriate producer-price data was available, particularly because the official PPI was released only in June and the input PPI remained at a trial stage.
Growth and lived experience
MoSPI’s Defense
MoSPI says aggregate GDP can differ from how individuals experience prices and economic conditions, which are also affected by uncertainty and global conditions.
Economists’ Concerns
Critics and members of the public have questioned why the reported growth rate is not being felt on the ground.
Key facts
- Main cause of revisions
- A shift from proxy-based estimates to direct annual survey evidence for the informal sector.
- New base year
- 2022-23.
- Earlier series discussed
- The 2011-12 series, including comparisons with the 2004-05 series.
- Informal-sector data
- The Annual Survey of Unincorporated Sector Enterprises is available quarterly, while the Periodic Labour Force Survey is available monthly, according to Garg.
- Price measure
- MoSPI used the 2022-23 output Producer Price Index for double deflation rather than the experimental input PPI.
- PPI and WPI comparison
- MoSPI said output PPI and legacy Wholesale Price Index movements were highly consistent and stable at detailed industrial classification levels.
- Data access
- Garg said access to databases such as MCA-21, MGT-7/7A, and GSTN at more granular anonymized levels would require discussions with the relevant ministries.
Sources
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