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Dear Visitor: Equitymaster will be under maintenance from 10:00AM to 11.30AM on Sunday, 25 March 2018. During this period, our websites will be accessible though there is a possibility of some intermittent accessibility issues. Please bear with us. We are taking yet another step to make browsing Equitymaster a much faster experience! Thank you.

More clarity on GDP numbers soon...
Mon, 2 May Pre-Open

Gross Domestic Product (GDP) is the most popular measure of an economy's aggregate income. But have you imagined what a mammoth task it must be? Given all the difficulties involved in collating data on such an enormous scale, inaccuracies and misrepresentations are bound to happen. And thus, questions about the credibility of the numbers are inevitable. So far, the government has never made the national accounting methods public.

But some positive developments are on the cards. The government is soon going to make national accounting methods available to the public. According to the Ministry of Statistics and Programme Implementation, the methodology is in accordance with international standards. The same has been finalised and accepted by the National Accounts Division (NAD). Additionally, the Central Statistics Office (CSO), the chief agency that compiles GDP data, has set a protocol to make sure that before getting published, the data goes through a number of checks.

This new initiative will help better understand the manner in which official data is compiled. For instance, it will make clear how the services sector's contribution to the GDP is being measured. Also, there is difference in the way quarterly and yearly GDP growth numbers are calculated. The quarterly numbers of national accounts are mostly indicator based. The process involves a certain amount of extrapolation of values based on previously known information. Then as and when new information arrives, the quarterly figures are revised throughout the year. On the other hand, the final yearly growth rate is only declared after a gap of 11 months into the next year. For example, for the financial year 2009-10, GDP growth rate was revised to 8% after initial estimates of 7.4%.

We believe that any initiative that brings in more transparency and clarity is a step in the right direction. It will boost confidence in the credibility of the official numbers. However, further steps must be undertaken to improve the source and quality of data as well.

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Mar 23, 2018 (Close)