‘CSO forecasts, not estimates GDP growth’
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Much has been said about the five per cent GDP growth estimate for 2012-13 by the Central Statistics Office. But the country's former chief statistician Pronab Sen believes that it is in more in the nature of a forecast based on data from the first two quarters. Sen, who is now the country head of International Growth Centre and was previously the principal advisor, Planning Commission, told Surabhi that one needs to wait for the third quarter GDP data in February end to get a better understanding of the growth dynamics. Excerpts:
How are the Advanced Estimates of National Income calculated?
It is based on a methodology prescribed by the Central Statistics Office (CSO) and uses four pieces of data. The first are the advance estimates of the agriculture production that is prepared by the ministry of agriculture. The second input is the data from the Index of Industrial Production that is used to calculate manufacturing growth. The CSO also uses revenue and expenditure data released by the Controller General of Accounts and lastly the trade data that captures volume of exports and imports.
How reliable a gauge of the economy are the advance estimates of GDP?
We need to be very clear that the advance estimates are not really an estimate of GDP growth but are more in the nature of a forecast of growth in the fiscal. The CSO makes the calculation based on full data for the first two quarters of the fiscal and only partial data for the third quarter. The forecast is then based on the trend and it can't project any turning points in the economy.
Is there an underestimation of economic growth by the CSO for 2012-13?
We have a situation here where the sequential data for the first two quarters shows a slowdown. The same trend is then projected by the CSO for the next two quarters. If the economy turns up, it will never get captured in the current methodology. But from what we are getting to know now from the early indicators as well as analysts is that the third quarter this fiscal was the worst and the economy has started to revive in the fourth quarter. This is a problem that has been around for a while now.
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