In the labyrinth of economic indicators, India's gross domestic product (GDP) emerges as a perplexing enigma, shrouded in a cloud of controversy and methodological intricacies. The saga begins with the launch of the new BIP series based on 2011-2012 data, which sparked a heated debate about its accuracy and the rationale for its publication. The initial point of contention was the lack of a return series when the new series was introduced in 2015. Analysts raised eyebrows and questioned the validity of a methodology that appeared to obscure comparative analysis between the UPA and NDA periods. The specter of political influence was ever-present, raising doubts about the transparency of the government's economic narrative.
Fast forward to the pandemic-hit 2020, when the economy witnessed its sharpest contraction since independence. The rapid recovery, touted as evidence of India's resilience, raised eyebrows given underlying problems in GDP calculations. The paradox deepens when we note the highest growth rate during the turbulent demonetization year of 2016-17, revealing an alarming upward trend in GDP of 8 per cent. This anomaly points to a flawed methodology that overshadows the true state of the economy. When delving into the intricacies of GDP calculation, the quarterly estimates based on the production approach show the use of outdated benchmark indicators.
The last survey of unincorporated companies dates back to 2015-2016, meaning that the reference year is no longer necessary to capture the current economic reality. Extrapolating the annual figures from previous years raises a crucial question. How can accurate quarterly estimates be produced when the foundation itself is marred by errors and shocks? Talking about shocks, India has weathered multiple shocks since 2016: demonetization, GST implementation, NBFC crisis and the abrupt lockdown in 2020. Each shock changed the economic landscape and made traditional benchmark indicators irrelevant. The unorganized sector, a major player in employment, faced disparate impacts, leading to distortion in the ratio between organized and unorganized sectors and further clouding the calculation of GDP. While international agencies support India's GDP figures, they reflect the errors inherent in the official data. Blind reliance on flawed numbers raises questions not only about India's economic narrative, but also its broader implications for international comparisons.
The implications of inaccurate GDP numbers go beyond statistical issues. Macro aggregates such as consumption, savings and poverty measures are hostage to unreliable growth numbers. The break in the link between growth and employment, particularly with the unorganized sector facing decline, distorts the true picture of economic health. While the Center continues to champion these numbers, it perpetuates a narrative that is consistent with its political agenda but obscures the stark reality. The need for a comprehensive reassessment of GDP calculation methods, new surveys and a commitment to transparency has never been more urgent. Only then can we hope to unravel the secrets behind the numbers and gain insight into the true state of the Indian economic landscape.
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