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The Big Picture – Changing GDP parameters: How will it help?

 

Summary:

  • The Indian GDP is poised to take an upward swing not because of any upward trend in the economy but due to a decision by the government to broaden the parameters that are used to calculate GDP.
  • Because of inaccuracies and exclusion of certain categories of the Indian economy all these years it is felt that the real size of the Indian economy has been suppressed so far.
  • Change in the estimation of national accounts is not new but it is routine a work. The GDP indicator is more relevant to the current situation and it also helps to understand the current behaviour of the economy, and hence the revision is necessitated.
  • This is not a change in the base year but shift in the production function itself wherein new commodities will be brought in and some obsolete commodities will be discarded.
  • Usually, there will be periodic revision of base year for every 5 years.
  • National accounts data is undercounting consumption data. There is also inconsistency in sources. Data collection is inadequate. We do not have adequate infrastructure to calculate the accurate GDP figures.
  • Our GDP enumerators are 1/3rd of the Chinese. Serious rethinking is required.
  • The problem lies in not covering the several parts of the economy.
  • We have large percentage of unorganized sector. And most of this sector is not covered yet.
  • Without knowing the ground data producing data affects even policy making.
  • There is definitely a gap between data and policy.

 

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