New Delhi- Princeton economist Ashoka Mody has raised allegations that the National Statistical Office of India is engaging in selective data manipulation to calculate the country’s GDP growth rate. According to Mody, the government’s announced GDP growth rate of 7.8% for the first quarter (April-June) of the fiscal year 2023-’24 conceals the actual figure, which he claims stands at 4.5% when more comprehensive data is considered.
India’s Chief Economic Adviser, V Anantha Nageswaran, has vehemently denied Mody’s claims, asserting that the government has consistently employed the same method to compute GDP growth figures.
In an op-ed co-authored with Senior Economic Advisor Rajiv Mishra in the Mint, Nageswaran remarked, “Some commentators remain steadfast in their refusal to let evidence sway their pre-existing stances.”
Mody’s assertion centers on the fact that the National Statistical Office primarily takes into account estimates of domestic income, neglecting expenditure, when calculating GDP growth. While domestic income comprises earnings from goods and services produced within the country, expenditure accounts for what both domestic and foreign entities pay to purchase them.
In an ideal scenario, these two figures should align, as income for producers depends on the sale of their output. However, disparities between the two are common worldwide due to imperfect data in national accounts.
Mody contends that it is prudent to recognize both income and expenditure as imperfect macroeconomic indicators and combine them to gauge the state of the economy. He pointed out that governments in Australia, Germany, and the United Kingdom adopt this approach. In the United States, the Bureau of Economic Analysis considers the average of expenditure and income, as significant disparities often emerge.
Mody’s analysis revealed a stark divergence in India’s first-quarter GDP figures, with income from production rising by an annual rate of 7.8%, while expenditure increased by only 1.4%. He argued that the National Statistical Office’s exclusive reliance on income data represents a clear violation of international best practices.
He further asserted that the National Statistical Office’s approach masks the reality of sluggish expenditure at a time when many Indians are facing economic challenges, and foreign demand for Indian goods is limited.
While Nageswaran countered Mody’s claims by explaining that India’s data systems favor estimates from income figures over expenditure, he failed to address other contentious issues such as economic inequality, spending capacity, and job scarcity raised by Mody.
In his article for Project Syndicate, Mody highlighted that the share of imported items in expenditure data had increased from 22% to 26% before the coronavirus pandemic. He explained how an overvalued exchange rate allowed affluent Indians to purchase luxury items abroad while the majority struggled to afford necessities.
Regarding employment, Mody noted that the finance and real estate sectors experienced the sharpest growth of 12.1% in the first quarter, providing only a limited number of jobs for highly qualified individuals. He also emphasized the weakness of the manufacturing sector, typically a key source of employment in thriving developing economies, in post-Covid India.
As the debate continues, Mody’s claims have ignited discussions on India’s economic data accuracy and the need for comprehensive and transparent reporting
