A few days after Advance Estimates (AE) showed that the expansion in gross domestic product (GDP) is set to decline to a four-year low of 6.5 per cent in 2017-18, Chief Statistician T C A Anant tells Dilasha Seth & Inspanjal Dhasmana the data showed there was continued growth momentum. Edited excerpts:
Why do you say AE of GDP for 2017-18 are conservative?
I am using the word “conservative” in a different context. Statistical forecast, especially in this case, is based on available data. Mostly, the data comprises Actual Estimates, whether in advance corporate filing or agriculture. These were not based on scenario or sentiment analysis. This is a forecast as the year is not complete. It is a very conservative approach to forecasting, as against a lot more analysis- and scenario-based forecast approaches. By and large, our experience is this approach has worked out well.
Does the word “conservative” also mean underestimation? Will the actual numbers turn out to be higher?
It could turn out higher or lower. That’s with every forecast. The principal approach to assessment here is that all data is readily available. Methodology is available in advance. There is very little of assumption- or modelling-based exercise in this. There are assumptions, of course, but those are already built into the methodology and explained.
Do you think GDP growth has bottomed out?
I had stated it at the time of the release of the second quarterly data. That has been substantiated in the AE. Otherwise, AE would have been different. Our method of forecast has been stated. The method implies that growth momentum is going to continue and increase. That does not show that growth has declined.
But, yearly growth was less in AE than projected by the Economic Survey and the Reserve Bank of India
Someone else may have wanted it to be higher. They may have reasons to think that the growth would be higher.
Could there be a downward bias in the AE for GDP because you base it on the trend in the second half of the previous year, which was subdued due to demonetisation?
It’s not that simple. A trend of the previous four to five years is seen to work out the relationship between the first half, or rather seven months, with the remaining months and use those proportions. It is not based on the previous year alone, as it would lead to a very volatile data.
Data seems to suggest that in the second half there was still an impact of the goods and services (GST) tax. Do you think so?
What we see in the second half is the growth momentum we saw between the first and the second quarters is being maintained. The GST has two sorts of impacts. One is on the revenue process. Numerous statements are being made by the GST Council on ways being taken to smoothen that out. That is so far as the revenue side of the GST is concerned.
The second is the impact on the people who pay taxes and their behaviour. Here, there were two things. One is before the GST came in what led to slowdown in growth. Now, there is something taking place after the GST roll-out. It has a number of benefits for the people who pay taxes. Simplification in procedure, a shift to a single tax from multiple taxes, and so on. These will lead to efficiency gains in production and have not been fully realised. These gains will be realised in due course.
Do you think that the impact of the GST was still visible, since manufacturing growth is estimated to be down to 4.6 per cent in 2017-18 from 7.9 per cent in the previous financial year?
The estimate for manufacturing in any give year is influenced by a variety of factors. As a professional statistician and economist, I am not happy with trying to simplifying it and pinning it down to a single factor. There is an element of the GST in lower growth in the first quarter. Of course, there are other factors — both international and domestic, influencing manufacturing.
You had earlier said inventory growth will increase from the third quarter onwards. However, growth has drastically come down in AE for 2017-18, compared to the previous year, both in current and constant prices.
But, you don’t have numbers for the third quarter. At the moment, we have only actual numbers till the second quarter. I had said the portion of slowdown in the first quarter was due to businesses clearing out inventories in order to not have pre-GST stocks on the shelves. When we saw the second quarter numbers, the assumption was that most of these shelves have been restored. What I had said does not seem to be suggested by the data. A chunk of the production was to meet the demand for the festive season. As such, the process of building up that stock will be a long-term dynamics.
The AE showed that growth in gross fixed capital formation rose from 2.4 per cent in 2016-17 to 4.5 per cent in 2017-18. On the other hand, growth in government expenditure fell from 20.8 per cent to 4.5 per cent over the same period. Does it mean that private investments have started reviving?
Not necessarily. You need to look at the composition of the government expenditure, which is not available as of now. These would be available at the end of the year.
The strike rate of correctness of advance estimates with the first provisional data has been 100 per cent in the previous couple of years despite demonetisation causing disruptions in 2016-17. Do you think this would be true this time around as well?
I hope so. But, I don’t view it from this perspective. An estimate is based on a set of assumptions. It does not necessarily mean that reality will not change from those assumptions.