Can GDP numbers be Fudged?

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Introduction

Recently, there is a controversy regarding the GDP number that is projected to reach 7.8% year-on-year.  Some of the politicians from the opposition and economists claim that this number is fudged to inflate GDP. The central government defended that its first quarter number has been calculated following standard methods that are used in other countries. Ceasing the opportunity to attack the government, the opposition parties quickly jumped into the bandwagon, repeating the suspicion aired by the ex-finance secretary of the central government. The ex-finance secretary further said that wrong figures would dent the investor confidence.


 

Ex-Finance Secretary Claim

Some days ago, an ex-finance secretary in the ministry came out with the claim that the first quarter result of the current financial year GDP number was fudged, citing the downward revision of the nominal GDP from Rs 86,000 crore to Rs 80,000 crore in the last quarter of the year before. He alleged that it was done deliberately to inflate the GDP  for the first quarter of the current fiscal year. He questioned the rationale behind the downward revision in the last fiscal year. He said that the GDP number calculated based on the nominal GDP cited earlier before the downward revision would have been 2.6%. He alleged that the incumbent government at the center did this to inflate the GDP to falsely project the country's economy as positively good. He further added inflated GDP based on wrong calculation would erode the investor confidence, resulting in the decrease of capital flow in the Indian market.

GDP Growth

Ecoomists' View

The government institutions such as State Bank of India (SBI research) and World Bank Executive Director Neelkanth Mishra strongly contended that the critics' calculations were flawed. They supported the government numbers. They clarified the confusion prevailing about the newly released GDP number. Corroborating their observation, they cited a data revision change of base year from the years 2011-2012 to 2022-2023 in February 2026. The reputed economists like Neelakath Mishra and Surjit Balla explained that the data from the base year 2011-2012 cannot be structurally compared with that calculated from 2022-2023 as the base year. The new statistical framework uses completely different data sources, product weights, and index parameters such as upgraded IIP and PPI inputs. 



Government Stand

The central government has been telling consistently that it has followed methodology that is followed worldwide. It has nothing to hide. It said that the base year was changed in accordance with the standard operating procedure. It cited the A grade provided by the Japanese rating agency to cite its accurate and timely fiscal policies. The cabinet ministers of the central government have started appraising people in their respective constituencies about this achievement. They also gave the press briefing about this, countering the allegations made by the opposition parties, especially the Congress and Samajvadi Party (SP). The opposition parties have demanded a white paper from the incumbent government at the center. The government has been consistent in saying that all is good with the country's economy as revealed by its GDP for the first quarter of the current fiscal year. 

real gdp







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