Comment by Riaz Haq on June 2, 2016 at 9:14pm

#Indian CSO estimates overstate #GDP, Use Wholesale price deflator, not retail price deflator #Modi #GDP #India #GDP

http://www.thehindu.com/business/Industry/cso-estimates-overstate-g...


Gap in methodology arose from the use of smaller-than-appropriate weights for CPI

The Central Statistics Office’s GDP figures released on Tuesday overstates the extent of growth, according to analysts. A number of statistical deficiencies plague the data, they said. The main issue is that not all of the growth that the figures show is on account of real growth. Much of it is purely on account of the increase in prices, which ought to have been deflated out adequately. According to HSBC Global Research the gap in the methodology arose from the use of smaller-than-appropriate weights for consumer price inflation in the GDP deflators. It found that correcting the consumer- and wholesale-prices mix in the deflators, giving them equal weights, suggests India’s Gross Value Added (GVA) grew 6.2 per cent in the January-March quarter, slower than the official estimate of 7.4 per cent.

“Price changes that boost nominal earnings are being ascribed to real growth,” JP Morgan Research wrote in a note to clients. “Much of the value-added is because of input prices falling more than output prices (i.e., nominal margins being boosted), which needs to be deflated out.” The faulty approach can be seen in the manner manufacturing value-added was deflated.

Input prices
Input prices are falling more than output prices, boosting the nominal margins, and inflating much of the value-added in the manufacturing sector. In the absence of adequate deflation, manufacturing growth was exaggerated, wrote HSBC Global Research.

CSO data put real manufacturing growth at 9.3 per cent in the January-March period. This was at odds with the IIP data for the same quarter, which showed a mere increase of 0.2 per cent, JP Morgan wrote. Similarly, inadequate deflation also affected the way tax changes were incorporated into the GDP data. It led to overestimation of taxes, which drove the GDP well above the GVA. GDP is calculated as a sum of GVA and indirect taxes from which the value of product subsidies is deducted. The difference in the GDP and GVA growth estimates is striking; it widened to 0.4 per cent from 0.1 per cent in the previous financial year. Separately, data show that contraction in exports is slowing, according to HSBC.

Comment by Riaz Haq on June 18, 2016 at 9:06am

#India's #RBI chief Raghuram Rajan to leave, punished for questioning #Modi's fudged GDP figures http://scroll.in/article/810200/raghuram-rajans-letter-makes-it-cle... … via @scroll_in

Raghuram Rajan will not be the governor of the Reserve Bank of India after September. That's not idle speculation inspired by Bharatiya Janata Party leader Subramanian Swamy's campaign calling for him to leave. It has been announced by Rajan himself in a letter to his colleagues at the central bank which the RBI published on Saturday. The internationally renowned economist wrote that he will be returning to academia after the end of his tenure as governor on September 4. 

This ends months of speculation over whether Rajan, a United Progressive Alliance appointee, would see his tenure extended after his three-year term ends. Swamy was at the head of a public, often nasty campaign calling for Rajan to be sacked because he is not "mentally fully Indian." Swamy claimed that there were many others in the BJP who agreed with him.

The campaign prompted plenty of pushback from others, particularly economists who have lauded Rajan for his efforts in helping stabilise the Indian economy over the past few years. Many also suggested that not extending Rajan's tenure would have a detrimental effect on India's image with the business community abroad. The Economic Times' Swaminathan Aiyar even said that Rajan leaving would see billions of dollars in investment also follow him out of the country. 

There were murmurs also that many in the establishment did not want Rajan to continue, in part because of his insistence on hawkish monetary policy that focused more on controlling inflation than cutting interest rates to make credit cheaper for industry.

The other reason why the government wanted him to go: Rajan's celebrity status, at home and abroad, meant he was one of the few people who could publicly criticise the government's policy. Most prominently, just as the government was touting India's status as the fastest growing major economy in the world, Rajan brought up the old phrase, "in the land of the blind, the one-eyed man is king." 

Swamy's campaign might have embarrassed the government, prompting the Prime Minister to say that the media shouldn't discuss these things and Finance Minister Arun Jaitley to criticise the personal attacks. But it hasn't stopped the government from asking him to leave.

Rajan says as much in his letter to his colleagues at the central bank.

As he wrote, Rajan was "open" to seeing the developments through, but the government was not on the same page. Discussions between the finance ministry and Rajan before the last monetary policy statement, where the central banker chose not to cut rates, did not go well.

As a result, come September, Rajan will be back at the University of Chicago and India will have a new RBI governor. Significantly, however, Rajan's final monetary policy statement is also likely to be the last one put out solely by an RBI governor: His tenure saw the signing of monetary policy agreements between the central bank and the government agreeing to inflation targeting as the primary aim of the RBI, as well as the setting up of a monetary policy committee – including government appointees with no RBI veto – that will set the interest rate. 

Whatever the view of his tenure as central banker, and there will be many over the coming days including the Sensex's verdict on Monday morning (which is probably why the decision was announced on the weekend), he will have left the RBI in a very different place than where the institution was before him.

Comment by Riaz Haq on December 23, 2016 at 8:25am

How #India lobbied #Moody's aggressively for ratings upgrade but failed. #Modi #BJP http://toi.in/Sth5fY82 via @TOIBusiness

India criticised Moody's ratings methods and pushed aggressively for an upgrade, documents reviewed by Reuters show, but the US-based agency declined to budge citing concerns over the country's debt levels and fragile banks.
Winning a better credit rating on India's sovereign debt would have been a much-needed endorsement of Prime Minister Narendra Modi's economic stewardship, helping to attract foreign investment and accelerate growth.
Since storming to power in 2014, Modi has unveiled measures to boost investment, cool inflation and narrow the fiscal and current account deficits, but his policies have not been rewarded with a ratings upgrade from any of the "big three" global ratings agencies, who say more is needed.
Previously unpublished correspondence between India's finance ministry and Moody's shows New Delhi failed to assuage the ratings agency's concerns about the cost of its debt burden and a banking sector weighed down by $136 billion in bad loans.
In letters and emails written in October, the finance ministry questioned Moody's methodology, saying it was not accounting for a steady decline in the India's debt burden in recent years. It said the agency ignored countries' levels of development when assessing their fiscal strength.

Rejecting those arguments, Moody's said India's debt situation was not as rosy as the government maintained and its banks were a cause for concern, the correspondence seen by Reuters showed.
Moody's and one of its lead sovereign analysts, Marie Diron, declined to comment on the correspondence, saying ratings deliberations were confidential. India's finance ministry did not respond to requests for comment.
Arvind Mayaram, a former chief finance ministry official, called the government's approach "completely unusual".
"There was no way pressure could be put on rating agencies," Mayaram told Reuters. "It's not done."
Debt burden, bad loans
India has been the world's fastest growing major economy over the past two years, but that rapid expansion has done little to broaden the government's revenue base.
At nearly 21 percent of gross domestic product (GDP), India's revenues are lower than the 27.1 percent median for Baa-rated countries. India is rated at Baa3 by Moody's, the agency's lowest notch for debt considered investment grade.
A higher rating would signify to bond investors that India was more creditworthy and help to lower its borrowing costs.

While India's debt-to-GDP ratio has dropped to 66.7 percent from 79.5 percent in 2004-05, interest payments absorb more than a fifth of government revenues.
Moody's representatives, including Diron, visited North Block, the colonial sandstone building in the Indian capital that houses the finance ministry, on September 21 for a discussion on a ratings review.
The atmosphere at the meeting with economic affairs secretary Shaktikanta Das, one of the ministry's most senior officials, and his team was tense, according to an Indian official present, after Diron had told local media the previous day that a ratings upgrade for India was some years away.
On September 30, Moody's explained its methodology to Indian officials in a teleconference.

Comment by Riaz Haq on December 23, 2016 at 8:26am

How #India lobbied #Moody's aggressively for ratings upgrade but failed. #Modi #BJP http://toi.in/Sth5fY82 via @TOIBusiness

Four days later, the finance ministry sent an email to Diron questioning Moody's metrics on fiscal strength. The government cited the examples of Japan and Portugal, which enjoy better ratings despite debts around twice the size of their economies.
"Given that countries are on different stages of economic and social development, should countries be benchmarked against a median or mean number (as is done by Moody's)" the email asked.
In India's case, "while the debt burden lowered significantly post 2004, this did not get reflected in the ratings", the ministry argued.
New Delhi urged Diron to look at improvements in the factors - better forex reserves and economic growth - that Moody's had considered when handing India its last ratings upgrade in 2004.
In a reply the next day, Diron said that, not only was India's debt burden high relative to other countries with the same credit rating, but its debt affordability was also low.
She added that a resolution to the banking sector's bad loan problems was "unlikely" in the near-term.
In a last-ditch effort on Oct. 27, Economic Affairs Secretary Das sent a six-page letter to Singapore-based Diron, addressed to Moody's New York headquarters.
Reiterating points on India's fiscal strength, Das asked Moody's for a "better appreciation of the factual position".
Das dismissed Moody's concerns on India's public finances as "unwarranted" and told the agency that there was "scope for further lowering" the political risk perception to "very low".

"In the light of stable external debt parameters and the slew of reforms introduced in the realm of foreign direct investment, you may like to reconsider your assessment on 'external vulnerability risk'," he wrote.
Moody's on November 16 affirmed its Baa3 issuer rating for India, while maintaining a positive outlook, saying the government's efforts had not yet achieved conditions that would support an upgrade.

Comment by Riaz Haq on June 3, 2017 at 8:17am

#India's #GDP growth rates overstated by govt, Actual growth closer to 5%-5.5%, not 7.1%: Expert http://ecoti.in/Marrlb  via @economictimesIndia's national accounts on economic growth wrong: Expert

BY PTI | UPDATED: JUN 03, 2017, 01.51 PM IST


Read more at:
http://economictimes.indiatimes.com/articleshow/58973943.cms?utm_so...

"They (India's national accounts) show India's growing at seven per cent a year. But I along with many other economists, I'm afraid don't believe the national accounts. They were redone in 2011," Vijay R Joshi, Emeritus Fellow of Merton College, Oxford and Reader Emeritus in Economics, University of Oxford, told a Washington audience. 

Joshi, the author of a book titled 'India's Long Road--The Search for Prosperity' alleged that India's growth rate is back at 5.5 per cent, but the na .. 

Comment by Riaz Haq on August 21, 2018 at 5:16pm

#India’s GDP being questioned. In 2015, the #Modi government changed #GDP calculation with base year changed from 2004-05 to 2011-12, dramatically increasing #India’s GDP growth overnight to 6.9% from 5% reported earlier. 

https://qz.com/india/1364386/indias-gdp-numbers-are-being-questione...


So how fast exactly did the Indian economy grow around a decade ago? India is still confused about this.

On Aug. 17, the Narendra Modi government’s ministry of statistics and programme implementation (MOSPI) released the GDP numbers for the previous years under the new series that have been in use since January 2015.

According to this, the economy grew at 10.08% in the financial year ended March 2007 under the previous Congress party-led government.

While growth did slow down in subsequent years, on average it was still higher at 8.1% than under the present Narendra Modi-led dispensation—7.3% on average for the four years since 2014 when he took power. Yet, one of the pillars of Modi’s 2014 poll campaign was a perceived slowdown of the economy under Congress rule and the promise of achhe din (good days).

In the past one-and-a-half-years alone, economic growth has come under severe pressure following the demonetisation exercise of November 2016 and the introduction of the goods and services tax in July 2017. In the financial year 2018, GDP growth slipped to 6.7% from the previous year’s 7.1%.

Not surprisingly, the new data has sparked a political debate, besides confusion.

So much so that a day later the MOSPI added a caveat to its recent report: These are not the final figures. These disclaimers were not present till Friday (Aug. 17) and have been added subsequent to the release.

The confusion
In 2015, the Modi government shifted to the new series for GDP calculation, for which the base year was changed from 2004-05 to 2011-12.

As a result, the country’s GDP growth rate rose overnight. For instance, for fiscal 2015, growth was sharply revised up to 6.9% under the new calculation from the 5% reported earlier.

However, one glaring problem with this shift was that data for previous years was no longer comparable, nor, therefore, relevant.

But that transition now appears to have deeply embarrassed the current government.

So, soon after the report was released on Aug. 17, the Modi government dismissed it, saying the numbers were not official and were only experimental. This move was perceived in some quarters as firefighting. Again, on Aug. 21, it was reported that the original report itself had been removed from the site. However, Quartz did find it on the MOSPI website, but through a whole new link.

Economists believe all this confusion could have been avoided.

“Now, the data has been placed on the ministry website which gives one the impression that the data has been accepted by the government. But later in chapter six, it mentions that the Central Statistical Office is still working on the data. And then later the disclaimer was also added,” explained Devendra Kumar Pant, chief economist at India Ratings and Research, referring to the root cause for the confusion.

It needs to be said, however, that discrepancies in data are normal when the base year is changed as they are dependent on multiple factors.

Comment by Riaz Haq on August 26, 2018 at 10:55am

How GDP new series changes the picture of Indian economy
Learnings from the National Statistics Committee report on GDP calculation and its impact on how we see the Indian economy

https://www.livemint.com/Money/DRtb2vkAd8qiW1pCcdkUjM/How-GDP-new-s...

How GDP new series changes the picture of Indian economy

Learnings from the National Statistics Committee report on GDP calculation and its impact on how we see the Indian economy

Last Published: Thu, Aug 23 2018. 08 16 AM IST

Manas Chakravarty

https://www.livemint.com/rf/Image-621x414/LiveMint/Period2/2018/08/23/Photos/Processed/m2mGDP-kG0D--621x414@LiveMint.png" alt="Under the GDP new series, the share of industry has gone up, while that of services has declined. Graphic: Mint" title="Under the GDP new series, the share of industry has gone up, while that of services has declined. Graphic: Mint" class="m_4978148059479444132img-responsive CToWUd a6T" tabindex="0" />

Under the GDP new series, the share of industry has gone up, while that of services has declined. Graphic: Mint

The Report of the Committee on Real Sector Statistics, containing the much-anticipated GDP back series data, is apparently just a draft report, according to the ministry of statistics and programme implementation. But while the numbers are yet to get the official imprimatur, the report does have a number of interesting things to say about the Indian economy. That’s apart from the puerile squabbling about growth rates under different governments.

How does the picture of the Indian economy change when we adopt the latest shiny new measuring rod—the GDP series with 2011-12 as base year?

Let’s take the fiscal year 2011-12 for illustrating the changes. First, the economy gets smaller. Under the new series, gross value added (GVA) at basic prices, (at current prices) was 3.4% lower than under the old series.

But it’s the composition of the economy that’s interesting. The share of industry in the economy has gone up when we use the new measuring rod and the share of services has shrunk. Recall the complaints about India’s unnatural dependence on services—well, the new series paints a slightly better picture, but not enough to dispel the gloom.

In 2011-12, using the new series, the share of industry in the Indian economy goes up to 23% from 19% under the old dispensation.

Manufacturing goes up from a measly 14.7% of total GVA to a bit more respectable 17.4%.

Correspondingly, the share of services shrinks when we use the new series. In 2011-12, services accounted for 63% of total GVA under the old measurements and 58% under the new one. The share of trade, hotels, transport and communication shrinks from 24.7% under the old series to 17.4% under the new one. That’s a substantial reduction, the reasons for which need to be explained. But the share of “financing, insurance, real estate and business services” goes up, as does the share of construction.

Agriculture was 17.8% of the economic pie in the old series and that increases to 18.5%. The details can be seen in the chart above. Note that the data pertains to a single year—2011-12—and the changes are due entirely to our using a new measuring rod to compute GDP and GVA.

How did the share of manufacturing change between 1993-94 and 2011-12? Under the old series, it fell from 15.4% of GVA to 14.7%; under the new series, it went up from 16.8% to 17.4%. So perhaps it’s not entirely premature de-industrialization, but stagnant industrialization? Hard to tell—in 2017-18, the share of manufacturing had slipped back to 16.7%.

What changes did the new series have on the expenditure-side GDP figures? For 2011-12, the biggest change is in gross fixed capital formation—it went up from 31.8% of GDP under the old yardstick to 34.3% using the new one. The share of capital formation is higher under the new series. On the other hand, the consumption share is only slightly different. The details are given in Chart 2.

Click here for enlarge

There’s another curious feature about the new GDP back series. From 1994-95 to 2002-03, growth rates under the old series at constant prices were higher every year than in the new series. But from 2003-04 onwards, growth rates have consistently been higher under the new series than under the old one. What changed in 2003-04 to alter the trend? It’s possible that some activities were measured from 2003-04 onwards but not earlier. The final data release should tell us the reasons.

And finally, it’s important to note that even the data under the new back series suffers from serious limitations. A note to one of the tables on GDP in the report says, ‘‘Discrepancies found to be volatile and constant price series could not be estimated.”

Another table shows that discrepancies under the GDP data in the new back series range all the way from a negative ₹1.93 trillion in 2007-08 to a positive ₹1.14 trillion in 2013-14.

The report says, “when we look at the growth rates, there are some differences, although not significant and this is largely due to the ‘discrepancy’ variable, which is found to be highly volatile”.

Comment by Riaz Haq on October 5, 2018 at 10:56am

Gita Gopinath and #India’s Brain Drain. High-profile #IMF chief economist and other western-trained #Indian economists no longer appear welcome in Narendra #Modi’s government. https://www.wsj.com/articles/gita-gopinath-and-indias-brain-drain-1...

Harvard professor Gita Gopinath’s appointment as chief economist of the International Monetary Fund raises a question about her native India: Is IMF Managing Director Christine Lagarde more likely than Prime Minister Narendra Modi to hire someone with Ms. Gopinath’s stellar academic credentials?

In the past two years, three high-profile Western-trained economists have exited important policy-making positions in India to return to academia in the U.S. A rising drumbeat of nativist sentiment, increased political interference...

Comment by Riaz Haq on December 4, 2018 at 10:48am

#Modi-nomics has yet to deliver for many in #India. #BJP has largely failed to deliver on promise to transform India for better, relying instead on buzzwords, fudging statistics and rebuking its admittedly scandal-tainted opposition. https://www.ft.com/content/a1a6e8d4-f4bb-11e8-ae55-df4bf40f9d0d via @financialtimes

India’s ruling Bharatiya Janata party is no stranger to changing history. In 2016, it omitted India’s first prime minister Jawaharlal Nehru from a state-level textbook. A few days ago, the central statistic offices revised down an estimate of annual Indian growth during the previous period when the rival Indian National Congress was in power, from 8.1 per cent to 6.3 per cent. That put it below the 7.3 per cent average for the first four years of BJP prime minister Narendra Modi’s term — and distracted from a slowdown to 7.1 per cent in the third quarter, from 8.2 per cent in the second. While the statistical office purports to be politically independent, opposition politicians alleged political interference was behind the revision. Mr Modi certainly has reason for nervousness, with key regional elections under way and a general election due by May next year. Despite the apparently healthy growth, much of the BJP’s promise for working Indians has yet to materialise. The decision to stop releasing official employment data earlier this year suggests that electoral promises to create good-quality jobs have not been met. Many Indians, including much of the large youth population, remain locked into informal and poorly paid occupations. Mr Modi has, meanwhile, pursued an economic policy of grand promises and bombast. Recent clashes with the Reserve Bank of India have centred on his attempts to boost growth. The outlook was clouded by defaults from a finance and infrastructure group in September. That led to fears for the stability of India’s shadow banking sector. The shadow bank crisis stems in part from the BJP’s grand strategy of demonetisation, removing larger-denomination notes from circulation as a way of delivering on a campaign promise to cut down on the black economy. With Indians forced to deposit old notes at banks, there was a flood of money into the financial sector. Much of this flowed to a growing collection of non-bank lenders, which became a big driver of credit growth as the big state-owned banks grappled with a rash of bad corporate loans. Many Indians supported demonetisation on the premise that it would hurt the undeserving rich. But it failed to remove more than a small portion of black money, while contributing to a sharp economic slowdown last year. In a recent speech before elections in the state of Chhattisgarh, Mr Modi likened demonetisation to a necessary but “bitter medicine”. Unfortunately, the poor have tasted that medicine disproportionately. Mr Modi’s other campaign promises, including infrastructure overhauls and improving manufacturing, have not yet been delivered. Some grandiose pet projects do not help his case. A planned bullet train in his home state of Gujarat epitomises a taste for the high-tech above the practical: it will be too expensive for most citizens. Building the world’s tallest statue, also in Gujarat, cost around $500m. Make in India, Mr Modi’s attempt to turn the country into a manufacturing powerhouse, has so far amounted to little. The BJP’s failings are by no means guaranteed to cost it next year’s election. But winning an election because of a broken opposition should not give Mr Modi’s economic policies a free pass. There have been some successes under the BJP, including revisions of bankruptcy laws. But the BJP has largely failed in its supposed goals to transform India for the better, relying instead on buzzwords, fudging statistics and rebuking its admittedly scandal-tainted opposition. It must begin to fulfil its promises or risk repeating the failures of administrations before it.

Comment by Riaz Haq on June 11, 2019 at 7:59pm

#India claimed gangbusters #GDP growth. A former government adviser says it was a mirage. #Modi #Hindutva #BJP @CNN https://cnn.it/2I7ZJZ0

Arvind Subramanian was the top economic adviser to the Indian government. Now he says the country's growth may have been overstated.

A change in the method used to calculate India's GDP led to "a significant overestimation of growth," Subramanian writes in a research paper published by Harvard's Center for International Development.
In the paper, Subramanian estimates that India's economy grew at an average of 4.5% a year between March 2011 and March 2017 — far weaker than the 7% average rate reported by the government over that period.
Subramanian tracked 17 different economic indicators that are "strongly correlated" with growth, including electricity consumption, industrial production and commercial vehicle sales.

He found those indicators diverged sharply from the government's growth numbers after 2011, the first year of data affected by the change in methodology.
The paper also found that India's reported GDP growth was far higher than other countries with similar economic characteristics.

"The results in the paper suggest that the heady narrative of a guns-blazing India must cede to a more realistic one of an economy growing solidly but not spectacularly," Subramanian wrote.
A former economist at the International Monetary Fund, he served as the government's chief economic adviser for most of Prime Minister Narendra Modi's first term.
Modi won a second term as India's leader in this year's national election.
Subramanian, who advised the government from October 2014 to June 2018, sought to explain his role on Tuesday.
"Throughout my tenure, my team and I grappled with conflicting economic data. We raised these doubts frequently within government," he wrote in an op-ed published by The Indian Express.
"But the time and space afforded by being outside government were necessary to undertake months of very detailed research ... to generate robust evidence," he added.
The new findings echo concerns expressed by some economists and analysts who have repeatedly said India's growth numbers are "inconsistent" with reality.
The change in GDP methodology was announced in 2015, but applied retroactively to data from as far back as 2011.

Subramanian admitted in 2015 that he was "puzzled" by the revised numbers, telling a local newspaper that the estimates may not necessarily be wrong but "bear further scrutiny."
The government has repeatedly defended the changes to GDP calculation.
"The GDP estimates ... are based on accepted procedures, methodologies and available data and objectively measure the contribution of various sectors in the economy," it said in a statement Tuesday.
As things stand, even the official numbers don't paint a very flattering picture.
India's economic growth slumped to 5.8% in the quarter ended March, according to official data. That's the slowest rate in two years, and one that cost India the title of world's fastest growing major economy.

Comment

• ‹ Previous
• 1
• 2
• 3
• Next ›
• Page