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Measuring India's economic health: GST data to be instrumental for correct diagnosis
TCA Anant retired as the chief statistician of India on February 1, 2018. So far, the government has not named a replacement, though it is searching for a suitable successor.
Measuring India's economic health: GST data to be instrumental for correct diagnosis

TCA Anant retired as the chief statistician of India on February 1, 2018. So far, the government has not named a replacement, though it is searching for a suitable successor. KV Eapen, Secretary, Department of Administrative Reforms and Public Grievances, Ministry of Personnel, Public Grievances and Pensions, has been given the additional charge of the post of Secretary, Ministry for Statistics and Programme Implementation (MoSPI), but a search for a full time chief statistician is still on.

One of TCA Anant's big achievements during his tenure was the revamp of the methodology for collating data and calculating the Gross Domestic Product (GDP) - which included moving from factor cost to market prices, changing the base year, and finally expanding the number of companies in the sample.

Though the new methodology came for much criticism initially - among other things, the GDP growth calculated by the new method was higher than that when calculated by the old method - it has now been accepted by most people as being closer to global practices.

What he left unfinished though was revamping the other methods that are desperately needed. One, which has been much in discussion, is jobs data - India still does not have a reliable and quick method of calculating the number of jobs being created or the number of people unemployed in the country. The Niti Aayog has made some recommendations for revamping jobs data, and that has now been put up on the labour ministry site for comments from the public.

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T.C.A. Anant, Former Secretary, Ministry of Statistics and Programme Implementation.


The other big one, which does not get too much attention, is the creation of an Index of Services Production (IIS), which will give a clearer picture of the country's economic health than the current Index of Industrial Production (IIP).

MoSPI had initiated some basic work - including the development of a methodology to measure service production for railways, airlines and postal services. But it has not progressed beyond that. And yet, developing an Index of Services Production (IIS) is crucial because services account for over 53 per cent of the Indian economy today compared to industry (which includes manufacturing, mining and others) which accounts for roughly 29 per cent (Agriculture and allied accounts for the remaining).

IIP, which has been a mainstay of tracking the health of the Indian economy only tracks manufacturing, mining and electricity. It does not include almost any services. And yet, services not only comprises a bigger part of the economy in the country today, it is also the sector which is growing faster than both manufacturing and industry.

So why has there been a delay in developing the ISP? One reason is that almost all countries find the job of measurement of services much more difficult than measuring production. Despite that though, much progress has been made by developed countries in calculating service growth on a regular basis. Sweden, UK, South Korea and the US started on this journey well over a decade ago. The statistics office of the European Union member states (Eurostat) also requires measurement of turnover data for a wide variety of services on a regular basis. India, despite much of its growth in recent years being powered by services, has been a bit of a laggard in this matter largely because measuring service growth has been a much more difficult task than measuring production growth. So far, the only indicator of service health on a regular basis is the purchasing managers index (PMI) on services, which serves as a proxy for sentiment in the services sector.

But now, with the implementation of the Goods and Services Tax (GST), which not only brings most services under an unified tax net but also requires regular filing of invoices by all companies, reliable data on services should no longer be a problem. Indeed, GST should give a huge fillip to creating a reliable and robust ISP, which will be far better indicator of economic growth than the IIP. (And the method of measuring IIP and also GDP can get a big boost from GST data).

It would be good if the government, while choosing TCA Anant's successor, also gives him a brief on creating a robust methodology for ISP using GST data. It would go a long way in tracking the economic health of the country more rapidly than is being done now.

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