Back Series GDP data prior to 2011-12

Government of India adopted a new method for calculation of Gross Domestic Product (GDP) growth in 2015.The base year for calculation of GDP was revised from earlier 2004-05 to 2011-12. This created a practical problem of comparing present GDP with years prior to 2011-12 and to overcome this difficulty, Back Series GDP data was released. The data and manner of releasing the same  evoked severe criticism from economists and opposition political parties. 

New Vs Old methods of calculation of GDP

The major changes made in calculation of Gross Domestic Product are:’
•    Change in base year from 2004-05 to 2011-12. ( At present base year for calculation of Whole Sale Price index (WPI) and Consumer Price Index (CPI) is also 2011-12)
•    The government adopted the recommendations of the United Nations System of National Accounts. This method of calculation Gross Domestic Product involves measuring the Gross Value Added (GVA), Net Value Added (NVA), and the use of new data sources wherever available. MCA-21 database maintained by the Ministry of Corporate Affairs is a resource for calculating GDP. 
•    The new method involves a more granular approach. GDP is assessed by looking at the balance sheet data of each company available in MCA-21 site and aggregating the performance of the sector from that, after adjusting for inflation. 
•    The new approach is statistically more robust. The new GDP estimation links the calculation to more indicators such as consumption, employment, and the performance of enterprises. The new method of GDP calculation is responsive to current changes whereas the old method took 2-3 years to record an underlying change.

What are the difficulties faced in calculation of GDP based on new method?

MCA-21 database is available only from 2011-12. Hence with this base year, future calculation becomes simpler but calculating back series GDP data prior to the revised base year became tough as there is no matching data for those years. Presently, MCA-21 follows a granular approach. For years prior to 2011-12, new method warranted a splicing of new and old data in relevant proportions to arrive at the best estimation. 

This created issues while comparing recent data with periods prior to 2011-12 warranting government to recalculate the earlier years data with the present method of calculation. For many sectors, data could be recreated by changing the price vectors from 2004-05 to 2011-12. But for other sectors, complex methods needed to be adopted.  The Back Series GDP data relates to the GDP data of years prior to 2011-12 recalculated by adopting the new method of GDP estimation. 

Why did the Back Series GDP data attract controversy?   

The GDP growth recorded by the UPA-I and UPA-II governments were 8.1% and 7.46% respectively.   The new data release based on Back series GDP estimation shows that GDP growth during the UPA years averaged 6.7%. Based on the new method, during the first four years of the rule, the BJP government registered a GDP growth of average 7.35%. Further, GDP growth estimation is being handled by the Central Statistics Office where as the Back Series GDP data was released by NITI Aayog. 

It was perceived that Indian economy was in the ‘high growth’ phase with more than 9% growth in GDP whereas the new series reveals that it was never so. As per the old data, GDP growth had crossed 9% on four occasions and even hit 10.78% in 2011.  Further, based on the Back series data, economists declared that India did not recover from the global financial crisis as fast as initially thought.

According to the government itself, back series data can be calculated in many ways. The manner of data release by NITI Aayog, the timing of release coinciding with five state elections, and also the subsequent clarification by the government that the present data was just a draft report  have attracted criticism from all corners.