Wrong GDP calculation embarrasses government

The wide difference in GDP growth numbers under the two methodologies created co
nfusion among economists

New Delhi: Facing embarrassment after throwing forward sharply different economi
c growth figures based on two different methodologies, the government will soon
set the record straight on the pace of economic expansion.
According to the government data, the economy grew by 8.8% in the April-June qua
rter based on actual expansion without accounting for taxes a methodology known as
factor cost.
At the same time, the data released by the ministry of statistics and programme
implementation (Mospi) showed growth at market price, which reflects the value o
f the production or services that includes indirect taxes, at just 3.65%.
There were some problems in calculating GDP at market prices at constant prices,
and we will come out with a corrigendum soon, said an official with ministry of s
tatistics and programme implementation.
The Central Statistical Organisation (CSO) that releases the data is part of Mos
pi.
The wide difference in GDP growth numbers under the two methodologies created co
nfusion among economists.
Experts said GDP at market price should not have been so low, since indirect tax
es excise duty rose by 2% this fiscal, after the government partially withdrew stimu
lus measures.
The mistake was in calculating a price deflator, which is used for converting no
minal GDP into real GDP, explained the official.
Real GDP does not include inflation and hence considered a better indicator of a
n economy. Also, when economic growth rate is defined, real GDP is used, rather
than nominal GDP.