Real GDP growth 5%; Modi govt "doctored" data to arrive 7% rate, revising base figure, ignoring demonetization

By Our Representative
Prof Prabhat Patnaik, one of the topmost Indian economists, has revealed that the Government of India’s Central Statistical Organization (CSO), while announcing 7% gross domestic product (GDP) growth for the third quarter of 2016-17 (October-December 2016), did this by “revising downwards the base upon which this growth-rate is calculated”.
Calling it a clear case of “doctoring of statistics on the part of the CSO at the behest of the government”, Patnaik says, this manipulation automatically led to a surprise “jump in the growth rate from 6.2 to 7 percent”, a point noted by no other than Soumya Ghosh, who is the chief economic advisor of the State Bank of India.
Pointing towards how this was done, Patnaik says, “The GDP figure for the third quarter of 2016-17 (October-December), when the impact of the demonetization of November 8 is supposed to have been felt, is estimated to be Rs 30,27,893 crore.”
The base on which this was calculated was revised downwards not once but thrice, Prof Patnaik says, and the whole idea was to arrive at 7% rate of growth. First the base – which is third quarter GDP for 2015-16 – as announced on February 9, 2016, was Rs 28,52,339 crore. Then on May 31, 2016, this figure was slightly revised downwards to Rs 28,51,682 crores.”
As both these figures would have meant a 6.2% growth-rate for 2016-17, Prof Patnaik says, finally, on February 28, 2017, “suddenly”, the base was further reduced to Rs 28,30,760 crore, getting the third quarter growth rate of 7 percent for 2016-17!
This, says Prof Patnaik, was not the only manipulation. Pointing that the CSO’s GDP is not based “value added figures taken from the producing units”, he says, they have been taken from company balance sheet data, leading to a “lower coverage for informal sector producers who are not listed as companies, and who are the ones that have faced the brunt of the impact of demonetization.”
Then, he says, following demonetization the trade channels “paid promptly to the producers through currency notes that had been demonetized.” This led to the producers making “larger tax payments than usual to the government in the form of demonetized currency.” And as the net indirect tax collections “were far larger than usual”, the CSO decided to calculate these as gross value added, “boosting GDP figures significantly”!
Concludes Prof Patnaik, “The 7% growth rate for the third quarter of 2016-17 claimed by the government which would come down to 6.2 percent if the base figure is not adjusted, would come down further if the under-representation of the informal sector in GDP estimates is taken note of, and would come down still further if the effect of arbitrarily large net indirect tax collections is additionally taken note of.” In fact, it would have been 2% lower -- around 5%.

Calling this “inversion of reason” unprecedented in independent India, Prof Patnaik says, “One just has to step out of one’s home to the grocery shop round the corner to acquaint oneself of the drop in business which the grocer has suffered owing to demonetization.”
Instead of recognizing this, one sees is a Prime Minister “targeting a person of Prof Amartya Sen’s eminence through some fatuous and meaningless remarks about Harvard and ‘Hard Work’.”
“It is like the naked emperor strutting around in his nakedness and ridiculing all those who had called him naked with the words: ‘See how wrong and stupid you were. My courtiers have shown I am fully clothed’!”