In its latest World Economic Outlook, the International Monetary Fund (IMF) has cut India’s growth forecast by 20 basis points to 7.3 percent for the current financial year, citing National Accounts Statistics data, which indicated softer underlying momentum.
Gita Gopinath, chief economist, International Monetary Fund (IMF), sent out a message to India on the gross domestic product (GDP) math and the state of statistics. There are still some issues with the way India calculates its growth rate and the IMF is paying close attention to the new numbers that are coming out, said Gopinath to CNBC.
Gopinath said, “With regards to the newer numbers that are coming out, we are paying close attention to it, we are speaking closely to our colleagues in India and then we will make a determination based on that.” While she welcomed the changes made to the GDP calculation in 2015, including the change in base year, she also flagged concerns over the “deflator” used to calculate the real GDP.
To discuss this issue, CNBC-TV18's Latha Venkatesh caught up with Pronab Sen, former chief statistician and Sudipto Mundle, former chairman of National Statistical Commission.
Sen said, "The quality of the statistics in itself is not the question. Gopinath's statements had two components to it. The first component was the concern she expressed about the GDP deflators that are used and that is something that we have known. Once we moved away from volume indicator based GDP estimates to value, the importance of deflators and the prices that go into them became much more important and I am afraid we still haven't fixed that problem."
Mundle said, "I think the two parts of the remarks that Gopinath made are related. The lack of transparency relates to the way the deflators have been constructed. You mentioned the back series, as many people noticed the difference between the two sets of back series that were generated was not that much when it came to the nominal GDP. However, when the real was recast, you found a big change, so that is really a deflator issue and that also was to some extent concentrated in the financial sector."