What the new GDP series gets right, what needs fixing

The first estimates of independent India’s national income were prepared by a stellar team led by the national accounting pioneer Moni Mukherjee.

- Pramit Bhattacharya

Their work was supervised by a committee led by the renowned statistician PC Mahalanobis, and had two world-class economists as its other members: VKRV Rao and DR Gadgil. The committee was advised by the likes of Simon Kuznets and Richard Stone, who later won the Nobel Prize in economics.

Despite the involvement of these storied names, the national income estimates faced criticism. The people involved in the exercise themselves expressed scepticism about some of the national accounts data.

Revisions in the national accounts series (NAS) in subsequent decades were also followed by intense debates and passionate criticisms. Yet, the debate around national income or gross domestic product (GDP) numbers was never as polarised as it has been over the past decade.

Almost immediately after the last NAS revision exercise concluded in 2015, critics from within and outside the government expressed doubts over the accuracy of the GDP figures. Questions were raised about the manner in which a new corporate database (MCA-21) was plugged into the NAS series, the use of formal sector proxies to estimate informal sector growth, and the deflation strategy used to arrive at the real (inflation-adjusted) growth numbers.

The critics demanded that the MCA-21 database be opened up for public scrutiny, and that the new methodology be reviewed by an independent team of statistical auditors. The statistical establishment dismissed these demands, and in doing so, kept the controversy alive.