Monday , October 25 2021

NSSO pump breaks the calm in front of the PIB, new data of the series now under cloud darker


The loose contentious questions in the new data on India's GDP series may have become too stark to ignore.

The key data used to calculate GDP numbers under the new method is now clearly being dishonest, the Mint newspaper reported in a potentially explosive report citing the NSSO.

In what suddenly lent a new seriousness to the contested dispute over GDP data, the National Bureau of Sample Research (NSSO) found that 36 percent of companies taken into account for the recalculation of GDP are undetectable or misclassified.

There is a high probability that India's growth figures will decline if these "ghost" companies are removed from the data.

The NSSO study, released last week, covered the 12-month period up to June 2017. The results were so unsatisfactory that two major reports prepared by the NSSO based on them had to be discarded later.

The questionable numbers belong to the MCA-21 database of companies in the Ministry of Corporate Affairs. The ministry considered these companies as "active companies" – those that have returned with at least one turn in the last three years.

Back series: origins

The base year change is made in accordance with global best practices to capture important information more accurately. As of January 2015, the OSC updated the base year for the 2011-12 GDP calculation, replacing the base year of the old 2004-05 series, as recommended by the NSSO. A base year is carefully chosen because of the critical impact it has on the data.

The new series opted for the MCA-21 database, replacing the previous source, which used the RBI data on the company's finances. The shift was based on the idea that more detailed sectoral information and better disorganized sectoral data points would make the dataset safer.

After the change in the base year, GDP numbers from several previous years were revised to arrive at a fair comparison. The new series adjusted GDP figures for fiscal years 2005-12 using the new methodology with fiscal year 2012 as the base year.

GDP growth during EPS was lower, with a peak of 10.3% in fiscal year 2011 (later reduced to 8.5%) in the previous series. He also showed that the first four years under Modi recorded a higher average growth compared to the years of UPA.

After reviewing the back-series, the average UPA growth in FY06-12 fell to 6.82% from the previous 7.75%. By comparison, the four-year average growth under Modi was 7.35%, significantly higher than the Manmohan-era figures.

Modi's opponents were quick to take the new series to the cleaners, comparing it to a similar earlier attempt that backfired. An August 2018 recalibration by the Sudbury Mundle panel of the NSSO showed that the UPA years are better than those of the NDA.

Can of earthworms?

The use of MCA-21, which CSO originated from the Ministry of Corporate Affairs, was one of the most important changes made in the computing process when the new GDP series was launched in 2015. Several notable economists raised red flags when this bank was first introduced in the calculations of the national accounts, the report said.

What worried most economists was the fact that an untested database like this would probably have a large number of ghost companies or simulated entities that existed only on paper. Another major concern was the methodology, which many experts said would result in inflated estimates.

The ministry was urged by many experts to first disclose the MCA-21 data to researchers to prevent defective data points from impacting the final numbers. Even most of the sponsors of the new series – who thought the new method was better in many ways than the old one – wanted it to be examined by experts before using it.

Although the CSO has not yet made public the data, it has so far resisted the flood of criticism.

Statistics experts said the use of untested databases for the calculation of these important data cast doubt on the reliability of India's number regime, which is already suffering from the credibility crisis. This raises many troubling questions about the fall of the so-called Central Statistical Institute (CSO), they said citing statisticians.

How the holes were found

The NSSO stumbled on these serious anomalies while the 74th round of its service sector survey was underway, the report said. 15% of MCA-21 companies – listing details such as addresses – were considered closed or untraceable.

21% of companies were "out-of-coverage" – meaning they were not operating in the service sector, even though they were registered under that title and continued to appear on official data as service sector entities.

Even many of the correct entries – those registered and operating in the service sector – did not respond to the NSSO's questions, or did not keep any useful data.

The question of non-response was the most striking in the case of companies chosen from the MCA-21 database, the NSSO said. About 45% of MCA units were considered "out of research / casualties," while the "economic census / business registration" table had about 18% of these cases, the Mint report said, citing R Nagaraj, a professor at the Institute Indira Gandhi. Development research.

He stressed that MCA-21 needs to be made public, insisting that an adequate audit be conducted by independent experts.

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