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Is the GDP data based on poor quality database? Here's what experts say

Updated : May 09, 2019 08:56 PM IST

A number of questions have been raised over the quality of the government's database MCA21, which is used by the Central Statistical Organisation (CSO) in the computation of GDP.

The National Statistical Survey Organisation, which is a unit of the CSO, has discovered that about 12 percent of the companies in this database do not exist. Another 21 percent were out of coverage, meaning they were not doing what they were classified to be doing.

So is the GDP data erroneous? Is it an overstated or an understated GDP? How can one improve the corporate database? What should be the design of the statistical body of the country itself? What should be the role and powers of the National Statistics Commission (NSC)?

Here's what experts have to say:

R Nagaraj, professor at Indira Gandhi Institute: "I think this new NSS data shows that a large proportion, a significant proportion of companies, are fake companies or shell companies or they do not exist. If we factor this into GDP estimation, I think the GDP estimates would be lower and the growth rates would also be lower than what is officially reported."

Pronab Sen, former chief statistician: "If what Nagaraj is saying is correct then every revision of the GDP for the last three years should have seen a huge decline. I cannot think of even one which has demonstrated that. Remember the final one is based on reported companies only. So, there is no blowing up. So, by what Nagaraj is saying there should have been dramatic declines but that has not happened."

Sudipto Mundle, former member of National Statistical Commission: "They only count the activities of the companies which have reported at least once in the last three years, some activity. Now let us say that there is some gaming going on and a company has distributed its value addition across 10 shell companies only to reduce its tax liability and so on. That does not mean the activity has not happened. It is just that it is distributed incorrectly and therefore it will have all kinds of other distortion effect but not on the overall."
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