GDP to be recalculated for inaccuracies,says Pranab

Pranab Mukherjee said the estimates of 8.8 per cent GDP growth released would be revised.

Finance Minister Pranab Mukherjee on Wednesday said the estimates of 8.8 per cent GDP growth released on Tuesday would be revised if inaccuracies are found in its calculation. As per the GDP figures unveiled on Tuesday,the Indian economy posted a healthy 8.8 per cent growth rate in April-June the fastest quarterly growth in three years on the back of robust growth in manufacturing. However,the growth at market price,which reflects the value of the production or services after taking into account indirect taxes less subsidies,worked out to just 3.65 per cent,raising several questions over the GDP calculation.

While the government said it will stick to the 8.8 per cent growth rate for GDP at factor cost,the discrepancy,experts said,was on account of wrong measurement of GDP at market prices. The discrepancy element in the Q1,2010-11 figure for demand-side is Rs 22,000 crore against an average discrepancy of Rs 10,000 crore over 2009-10. This makes the data from the expenditure side less amenable to interpretation, said a research note by HDFC Bank. Nomura,a securities firm,said while the demand side painted a weak picture,the supply side presented a robust outlook.

Economists said the discrepancy arose due to incorrect use of the GDP deflator. Pronab Sen,who was till recently the Chief Statistician and is now with the Planning Commission,said the deflator used to arrive at the production-based GDP data is 12.9 per cent,while that used to arrive at the expenditure-based estimate is 21 per cent. Had the deflator been the same,the GDP at market price would have been well over 10 per cent.

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The Central Statistical Organisation (CSO) does correct the figures as they are based on random surveys,Mukherjee said in Mumbai while projecting a GDP growth of 8.5 to 8.75 per cent for the current fiscal. He said criticism has been made about the projection from the demand side,that it is not matching with the growth that has been projected,and that will have to be addressed. Therefore,if there are some errors here and there,the revised figure will be given, Mukherjee said after a review meeting with tax officials here.

On the growth prospects for the Indian economy this fiscal,Mukherjee said,I am a bit conservative,but I will be too happy if the growth becomes 8.75 to 9 per cent. I am trying to confine my observations between 8.5 to 8.75 per cent. Though the monsoon has been good so far this year,the Finance Minister said that certain uncertainties do exist,considering the size and magnitude of the Indian economy. The impact of rain deficiency in parts of Bihar,Jharkhand and West Bengal will have to be looked at and we will have to wait for the ongoing kharif season to get over (to arrive at a final GDP figure), he said. Earlier,addressing a review meeting of top officials from the income-tax,customs and central excise,Mukherjee said the collection of direct taxes from Mumbai is below the national average though the overall direct taxes growth is satisfactory. He also expressed concern over a huge amount of around Rs 38,000 crore revenue locked up in appeals on the direct tax.

We expect the Indian economy to grow over 8.5 per cent during the year 2010-11,though IMF and CMIE are predicting it close to 9.5%. The sectors performing well in the Indian economy need to be monitored to ensure the due taxes to the government. The voluntary tax compliance depends upon risk perception by the taxpayers, Mukherjee said. As mush as Rs 28,046 crore is blocked in appeal before CIT (Appeal) and Rs 10,010 crore before ITAT,he said.

The FM said the manufacturing sector in the country is looking up and this has contributed in not only increased central excise duty but also increase in the imports of capital goods,machinery and other raw-materials which has in turn resulted in increase in customs revenue collection. In service tax,however,I find that the growth is much less. It is only about 8 per cent. I,however,fail to understand why the growth of service tax should be so small, Mukherjee said.