We have been overestimating GDP growth...: Former Chief Statistician Pronab Sen

India may have been consistently overstating its GDP growth, with former Chief Statistician Pronab Sen pointing to repeated upward biases in official estimates and raising questions about the methodology and data used to calculate real GDP.

In an interview with Karan Thapar, Sen said he found the latest 7.8% GDP growth figure for the first quarter “a little difficult to accept”. His concerns, however, were not about nominal GDP, but about how the government converts it into real GDP by adjusting for price changes.

“If you look at the base revisions of the GDP series that we've had in the past, we have consistently had an overestimation happening of about 2 to 3%,” Sen said. He added that this appeared to be “hardwired” into the calculations, with the overstatement corrected when the GDP base is revised.

The latest revision, however, was considerably larger, Sen noted. That has raised questions about whether India’s historical growth rate has been accurately captured.

Concerns over methodology

Sen’s concerns also extend to the methodology currently being used by the National Statistical Office (NSO). India has moved to a system known as double deflation, in which output and input values are separately adjusted for prices before GDP is derived.

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Sen said the approach itself is conceptually sound, but questioned whether the country has enough detailed data to implement it properly. “The problem that we had earlier is that we simply didn't have the data,” he said, adding that it remains unclear whether data collection has improved sufficiently.

He also flagged concerns about the use of proxies for inputs and criticised the lack of transparency around the data and processes being followed.

7.8% growth figure

On the controversy over the 7.8% growth figure, Sen rejected former finance secretary Subhash Chandra Garg’s calculation that growth was only 2.6% when measured against the original estimate for the previous year.

Sen said using the old estimate as the base was “conceptually wrong” because the earlier figure belonged to the previous GDP series. Once the base has been changed and the earlier estimates revised, the revised figure should be used for comparison.

At the same time, Sen said GDP revisions themselves should not be viewed as unusual or evidence of manipulation. Quarterly estimates are based on limited data and become more accurate as additional information becomes available, he explained.

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To improve transparency, Sen suggested that India publish overlapping GDP estimates using both the old and new methodologies for five years. This, he said, would allow analysts to assess how much the methodology changes the reported growth rate.

Ultimately, Sen said a back series based on the new methodology is needed to determine how India’s economy has actually performed over the years. Until that is available, questions over the country’s historical growth rate are likely to persist.