Inclusion of industry figures could have taken GDP to magical 6 per cent mark

NEW DELHI: The UPA government has received flak for the country's growth plunging to a decade low of 5% last year, but had it paid greater attention to ensuring more accurate industrial statistics, the numbers would possibly have looked a lot better.

Government calculations show that growth could have been as much as a percentage point higher in the past two years once data from the Annual Survey of Industries is factored in.

In the advance estimates of gross domestic product, industrial growth is derived from the Index of Industrial Production ( IIP), which is considered by policymakers and economists to be riddled with faults despite a recast a few years back and is again under review. GDP growth was 6.2% in 2011-12 and 5% in 2012-13. The corresponding industrial growth in these years was 3.5% and 2.1%, respectively.

The new assessment of far better numbers is based on similar revisions earlier and an analysis of corporate sales data compiled by the Reserve Bank of India.
Advance GDP estimates for 2009-10 pegged growth at 7.2%, which was revised to 8.6% when the final numbers were available. Next year, the advance 8.6% estimate was revised to 9.3%. The revision was based on fresh data from the Annual Survey of Industries (ASI), which comes with a two-year lag.

"There is a particular chance of a substantial revision," said Pronab Sen, chairman of the National Statistics Commission. "ASI captures activity of small units better."

The government's internal calculations based on corporate sales data suggest a significant upward revision once the final numbers are issued, an assessment private experts endorse.

The sample of companies analysed showed a 19.5% rise in sales in 2011-12 and 9.4% growth in 2012-13. Based on the past divergence in ASI and IIP data and this sales growth, the government expects final growth to be bumped up at least one percentage point in 2011-12 and a little less in 2012-13.

The ASI for 2011-12 will likely be available this week and could bring some statistical relief for the UPA, which suffered a severe drubbing in the recent assembly elections.

"We have seen significant revisions in the GDP... There is a continuous downward bias in the industrial production numbers that needs to be fixed to make the data more robust," said DK Joshi, chief economist, Crisil.

India's grew at its slowest pace in 10 years in 2012-13, as per official data. Finance minister P Chidambaram had questioned the advance estimates for 2012-13 that had pegged growth at 5%, saying it was based on "dated data". However, Joshi said directionally the story will not change. "Economy slowed in 2012-13 as compared to 2011-12," he said.