A big chunk of companies in India's GDP calculation don't exist: Report


  • Six months after India’s Ministry of Statistics, along with government think tank Niti Aayog, released a back-dated series of GDP data, sparking a huge outcry, India’s growth numbers have once again been questioned.
  • The current system of GDP calculation, which was introduced in 2015, uses numbers from a database of Indian companies, MCA-21 - which is compiled by the Ministry of Corporate Affairs (MCA).
  • However, a study by the National Sample Survey Office (NSSO), found that 15% of the companies in the database were either inactive or untraceable while another 21% were incorrectly classified.

Six months after India’s Ministry of Statistics, along with government think tank Niti Aayog, released a back-dated series of GDP data, sparking a huge outcry, India’s growth numbers have once again come under the scanner.

The current system of GDP calculation, which was introduced in 2015, uses numbers from a database of Indian companies, MCA-21 - which is compiled by the Ministry of Corporate Affairs (MCA).

However, as per a report by Mint, a study by India’s survey office, National Sample Survey Office (NSSO), found that 15% of the companies in the database were either inactive or untraceable while another 21% were incorrectly classified. The study, which was focussed on the services sector, extended from June 2016 to June 2017.

The companies in question had been designated as “active” by the MCA. To be deemed active, a firm has to have filed tax returns at least once in the last three years. The MCA-21 database isn’t public.

Hence, the existence of “ghost firms” or shell companies likely pushed GDP numbers during the Modi administration’s tenure upwards. The findings of the NSSO study once again call into question the accuracy of India’s GDP data.

When the government released the back-dated series of GDP in November last year, the numbers raised quite a few eyebrows as it showed that growth under the previous Congress government between 2004-05 and 2013-14 was less than what the current BJP-led administration has achieved over the last four years.

At the time, the government justified the move by saying the revised data took into account wider changes in the primary, secondary and tertiary sectors of the economy as well as different data sources and methods of calculation.

In March 2019, 108 economists and social scientists in India and abroad signed a joint letter that decried the political interference in India’s statistical institutions like the Central Statistical Office (CSO) and NSSO.

The joint statement also cited the government’s concealment of its most recent jobs report - the Periodic Labour Force Survey (PLFS) - owing to its unfavourable findings. In fact, the only non-government appointed members of the National Statistical Commission resigned from the body at the end of January owing to the shelving of data.


SEE ALSO:

India’s BJP-led government has released a set of revised GDP data that dramatically reduces growth during the previous administration’s tenure

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