Shocking Media reports saying India admits to error in GDP figure Untrue


Shocking Media reports saying India admits to error in GDP figure Untrue

It seems like a certain set of Indian Media which hates Modi Sarkar has again shamed this country infront of the world. They published an Article with the title that Indian Admits Error in GDP just when Modi was in US and talked about how fast India was growing and was cherry in the eyes of the slowing economies of the world.

Indian GDP
Indian GDP

The popular site “The Logical Indian” too attempted to raise questions about the GDP, albeit with dubious logic and poor English. The central question revolved around the data point in the GDP figures which is called “discrepancies”. The Deccan Chronicle chose to rename this technical term as “errors”, which made it appear as if the the GDP data itself is erroneous.

So what are these “Discrepancies”? It was well explained in this article on the Wall Street Journal:

Understanding these “discrepancies” requires first understanding that an economy’s size can be measured in three ways: by totalling up the value of all goods and services that are produced, by totalling up the amount that gets spent on those goods and services, or by totalling up what’s earned by selling those goods and services.

In theory, all three methods should yield the same number: GDP. In reality, it’s complicated. And in India, it’s even more complicated.

The country’s statisticians first calculate GDP from the production side, with GVA and taxes and subsidies as outlined above. They then compute another GDP estimate by adding up various kinds of spending, from personal consumption to business and government investment. But because timely, reliable spending data aren’t available in India, the two GDP estimates don’t usually match.

The difference between them is what’s labeled “discrepancies.” And this amount, whether positive or negative, gets added to the expenditure-based estimate in the reported data so that the two estimates come out equal, just as they would be in an ideal world.

In short, “discrepancies” is an element inserted just to balance the GDP equation, so that it fits the theoretical formula. The country’s chief statistician T.C.A. Anant further explained that:

Discrepancies don’t represent an actual part of the economy. They are inserted just to make an accounting relationship hold true. If India collected better data on expenditure, discrepancies would be closer to zero.

In summation, India has more data from the supply side, but inadequate data from the expenditure or demand side, which is why although supply side information gives the correct picture due to better data availability, expenditure side information falls short, hence the variable which is unknown is labelled as “discrepancy”. “Discrepancies” are essentially a balancing item, but also represent components which do not fit into a specific category. Also, in case of India, inventory data is quite poor, so looking at both inventory and discrepancies helps narrow the impact over time. To call this discrepancy an “error” is nothing short of malicious intent.

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