GDP Calculation Is Faulty Admits The Chief Statistician Of India

The Logical Indian

June 14th, 2016 / 11:00 AM

Source: deccanchronicle | Image Courtesy: taxingtax

The Chief Statistician of India T.C.A. Anant has admitted that there are “some discrepancies” in the recently released GDP data on Friday and has said that the government is making efforts to minimise them.

Going by figures, the government of India suggests that GDP has grown at 7.9% in the last quarter and it is also the fastest growing economy in the world.

The true story is that discrepancies have soared to Rs 2.14 lakh crore. The Logical Indian recently published an article that says discrepancies cover 51% of the GDP. If discrepancies are removed from the GDP, then the actual GDP would come down to a mere 3.9%. In the previous fiscal, discrepancies amounted to (-) Rs 35,284 crore.


So what are ‘discrepancies’?

GDP is calculated by two methods – a. Income method b. Expenditure method, ideally calculation by both methods should be the same, however, there are always some statistical differences amounting to 0.1 – 1 % and these numbers could be more in the case of developing country. Discrepancies even by a few percentage points is a red flag, to have discrepancies as 51% of GDP is beyond imagination and explanation.

Mr. Anant said that discrepancy occurs because the government compile expenditure estimates along with production figure, which is based on some rule of thumbs, the allocation does not completely explain expenditure side accurately and thus the difference between the two estimates becomes discrepancy, as reported by Deccan Chronicle.

Even if we take this into consideration, few recently published facts completely go against such high rate of GDP.

  1. The factory output measured in terms of Industrial Production (IIP) has shrunk by 0.8 per cent in April this year, the first decline in three months.
  2. Capital goods output, which is a barometer of investment, declined sharply by 24.9 per cent in April.
  3. The Business Expectations Index (BEI), which is a useful metric for the confidence of companies, has fallen to its lowest level in the last two years.
  4. The agricultural sector which also is a key factor for country’s GDP saw a growth of merely 1.2%.

At a time like this, how can the GDP of the country accelerate?


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