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FinMin says GDP overestimation due to MCA data a 'misconception'

A release from the government said that media has misinterpreted the out-of-survey enterprises to be enterprises that do not exist in the economy report.

twitter-logo Dipak Mondal   New Delhi     Last Updated: May 10, 2019  | 19:18 IST
FinMin says GDP overestimation due to MCA data a 'misconception'
Finance Ministry on NSSO's report on GDP

Refuting charges that the GDP numbers put out by the government may be over-estimated due to 'shell' companies which are untraceable, the government has said that the extent of overestimation of GDP in all likelihood is marginal.

Clarifying the problem pointed out by the Technical Report of Services Sector Enterprises in India by the NSSO, a release from the government said that media has misinterpreted the out-of-survey enterprises (as classified for the purposes of surveying the services sector) to be enterprises that do not exist in the economy report.

The release clarified that the survey has used sample of 35,456 enterprises taken from the database of Ministry of Corporate Affairs (MCA). Out of these 38.7 per cent were out-of-survey units. Of the 38.7 per cent out-of-survey enterprises in the NSSO report, out-of-coverage enterprises comprise 21.4 per cent. Simply put, the out-of-coverage enterprises are those enterprises that are not engaged in activities intended for inclusion in the service sector survey.

Of the remaining 17.3 per cent out-of-survey enterprises, 0.9 per cent are those establishments that are not considered in the MCA database for GDP estimation and the rest 16.4 percent are either closed or non-traceable enterprises. Therefore, it says that the extent of over-estimation due to untraceable enterprises is marginal.

It further says that the share of paid up capital of non-reporting companies used for GVA calculation is just about 12-15 per cent from 2012-13 to 2016-17. To neutralise the impact of unresponsive companies, the GVA estimate for responsive enterprises was blown up by a factor of only 1.13-1.17 to estimate the GVA of the entire private corporate sector.

The release further clarifies that even when there is a small over- or under-estimation, the blowing up affects the level of GDP and not the year-to-year annual growth rates materially.

The clarification comes after media reported that the NSSO has found many holes in MCA-21 data used for GDP calculation, hinting that it probably overestimates the GDP.

Also read: Leaving out shell companies would seriously underestimate GDP: Former Chief Statistician

Also read: Incredulous data: Economists create own benchmarks to measure Indian economy

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