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Overestimation in the Growth Rates of National Income in Recent Years? – An Analyses Based on Extending GDP04-05 through Other Indicators of Output

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  • Morris, Sebastian
  • Kumari, Tejshwi

Abstract

Quarterly indices of output like those of Industrial Production, other measures of production like net sales, exports, of companies for which data is available, besides proxies like credit to the sector, and indices of price levels have been used to forward project the growth rates of GDP04-05, for the principal sectors of the National Income Accounts (NAS). These were then compared with the growth rates given by the new Gross Value Added (GVA11-12) at constant price measure. It is very highly probable that some sectors of the National Accounts Statistics (NAS) notably Manufacturing, and Trade, Transport, Storage, Hotels and Communication Sectors were overestimated, especially in periods when the output (economic activity) was slowing down. This questions the use of the new GVA series for macroeconomic (policy) actions, wherein more than extensiveness of coverage, the movements over time of the measure have to be reliable and accurate. This is especially so because manufacturing and its related sector – trade etc., are the core sectors which are responsive to changes in policy and to shocks (that could be countered), wherein there is deep overestimation. Some evening out of the overestimation is noticed over the upswing in the business cycle since 2017:2. However the demonetization which rudely reduced demand did not allow the “phase shifting” and “flattening” aspects, which the new GVA series possibly imposes to be examined in detail, although the same is suggested.

Suggested Citation

  • Morris, Sebastian & Kumari, Tejshwi, 2019. "Overestimation in the Growth Rates of National Income in Recent Years? – An Analyses Based on Extending GDP04-05 through Other Indicators of Output," IIMA Working Papers WP 2019-01-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    • Handle: RePEc:iim:iimawp:14600
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    1. Ministry of Finance,, 2015. "Economic Survey 2014-15," OUP Catalogue, Oxford University Press, number 9780199460182.
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    1. Ajit K. Ghose & Abhishek Kumar, 2021. "India’s Deepening Employment Crisis in the Time of Rapid Economic Growth," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 64(2), pages 247-279, June.
    2. Arvind Subramanian, 2019. "Validating India's GDP Growth Estimates," CID Working Papers 357, Center for International Development at Harvard University.

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