The MCA database, which underpins the jump in factory GDP, is unconvincing. The ASI method was set aside for wrong reasons
In early 2015, the Central Statistical Office (CSO) introduced a new series of National Accounts Statistics (NAS) with 2011-12 as the base year, replacing the earlier series with the base year 2004-05. It is the CSO’s routine job to make such revisions, roughly once in a decade, to account for the changing economic structure, and relative prices.
Moreover, the revision allows for updating the statistical methods used, to keep up with the guidelines of UN System of National Accounts (SNA) and to introduce newer data series to improve the estimates. Usually, with base year revision the absolute GDP size gets slightly enlarged. But rarely, if ever, does the growth rate of GDP (or of its sectors) differ markedly between the new and the old series.
But this time it is different. For the base year 2011-12, the absolute size of India’s domestic output at current prices (at ?82,06,398 crore) is smaller than in the previous series (?83,91,691 crore) by 2.2 per cent; and, its growth rate in 2013-14 in real terms was higher at 6.6 per cent, compared to 4.7 per cent in the older series. (Note: GDP at factor cost in the older series is almost identical to gross value added or GVA, at basic prices; referred as GDP for simplicity).
For some sectors, even the direction of change has got altered after the revision. For instance, for 2013-14, for the manufacturing sector, real growth rate swung from (-) 0.7 per cent in the old series to (+) 5.3 per cent in the new series. Such drastic revision of industrial growth rates was met with considerable scepticism, as the revised (higher) estimates were quite at variance with other macroeconomic correlates, such as bank credit growth, or industrial capacity utilisation, or new investment projects launched.
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