Methodology of new GDP series is questionable, says Pronab Sen

Former chief statistician Pronab Sen has called for the National Statistics Office (NSO) to provide two distinct gross domestic product series, one utilizing the old base and the other employing the new base, for a period of at least five years. Sen emphasized that double deflation is the appropriate method, but only if data on both input and output prices are available. He pointed out that the GDP revision that occurred last year led to larger adjustments in the quarterly figures.

The release of a new GDP series in February this year, with 2022-23 as the base year, has been updated from the previous 2011-12 base. Data up to FY25 has been made available under the new series. Sen's remarks are particularly relevant given the recent questioning by former finance secretary Subhash Garg about the government's reported 7.8% real GDP growth for the April-June quarter of FY27.

Garg noted that the GDP for the preceding quarter had been revised downward to approximately ₹80 lakh crore from around ₹86 lakh crore due to the removal of base effects. This revision would have resulted in a nominal growth rate of around 2.6% without the benefit of the base effect.

The Ministry of Statistics and Programme Implementation stated that, in line with customary practices for calculating back series in India, estimates are recalculated using the revised methodology of the new series up to the most recent base, and then spliced at the disaggregated level. This process is expected to continue until December 2026.

In terms of the deflator, Sen suggested that the use of Producer Price Indices (PPIs) and double deflation should be considered. However, he expressed uncertainty about the robustness of the database for double deflation, as obtaining producer prices is challenging due to producers' reluctance to share pricing information, fearing that their competitors might learn about their charges.