GDP estimates would be higher with inclusion of deposits:
Anant Concerns have been raised following the announcement of advance gross domestic product (GDP) estimates at 7.1 percent for the first seven months as against 7.6 percent in the last fiscal. Chief Statistician TCA Anant says that higher growth would have been estimated if bank deposits after the roll-out of demonetisation would have been included. TCA Anant (more) Chief Statistician, Govt of India
Concerns have been raised following the announcement of advance gross domestic product (GDP) estimates at 7.1 percent for the first seven months as against 7.6 percent in the last fiscal. Chief Statistician TCA Anant says growth estimate would have been higher if bank deposits post-demonetisation had been included. He said the bank deposit data would have been a short-run fluctuation and therefore, an outlier. Hence, it was kept out of accounting. The dip in GDP estimates versus last year is mainly due to weak industry performance. Corporate earnings data will be out this week onwards and Anant says the assessment will be included in the third quarter estimates and help in filling gaps. As for the nominal GDP revision, which was pegged at 11.9 percent for the current financial year, he said it will largely depend on the inflation rate. Below is the verbatim transcript of TCA Anant’s interview to Prashant Nair and Ekta Batra on Prashant: We got the gross domestic product (GDP) numbers and we heard you were talking about it explaining the background and the context to it essentially telling us that the numbers are for the seven month period, April to October. You have consciously avoided using the November data to forecast the GDP.
Could you explain why you decided to do that? What will essentially fill in the gaps for you to be able to use the data post the demonetisation announcement as well? A: It is not that we didn’t use the data post November. In a specific indicator which is growth in bank deposits, growth in banks credit and bank deposits, we noticed that there was a -- as had been pointed out by many others also, that there was a very sharp rise largely on account of people depositing old currency into the banks. Since this reflected a very sharp rise in growth rate, we felt that this may have been a short run fluctuation and therefore an outlier. Since it was only one month’s data, we decided not to use it at this stage in the banking and financial sector where this indicator is used to calculate the gross value added (GVA) in that sector.
Now, it is of course correct that in the long run the trend of growth in deposits and credits will be changing, but we expect that the number will stabilise in the months to come. It is in that background that we decided not to use the November number. I am as yet not commenting on what would be the position taken in February because you will have to see the numbers as they emerge until then and appropriately a call will be taken on how best to model the estimates for this segment. We will disclose details on that when we have made those assumptions and made the calculations at that time. Prashant: You have not used the data only for the financial services sector you are saying? A: That is correct, in fact in the press note we have explained what data is available. It is true that for the most part there is very little data available for the month of November. Yes, some price data is available and that has been used as is used ordinarily but other than price data, the only other data which is available for the month of November is typically for the financial services and some limited core sector indicators, not all of which are used in GDP computation. However, the ones which are used have been used as in the past. Ekta: It is fair to assume that the CSO might in fact leave out the deposit data for the February estimates which come out on the February 28 as well? A:
It is too early to say anything about that. Ekta: So you haven’t made a decision as yet? A: We have not made a decision on how will the February estimate be computed. We will look at all the data when we are making the exercise for February and then take a suitable call at that stage. Ekta: The services data which you released, some of it had April to November data. I think it was for the trade, hotels and transport which is estimated at 6 percent versus 9 percent for the year. Do you think that there could be a big change from that 6 percent figure that was estimated in this estimate to February 28 based on the incremental information that you are receiving?
A: The estimate which we give at this time is with the exception of financial services where I just explained used all the data which is currently available. Now, based on the data which is currently available, this is what the forecast implies. There is no additional information in so far as data is concerned which allows you to say that which direction will the estimate go in February so to say, do you expect it to remain the same or do you expect it to change, I could answer that only if I had additional data. Since I have no additional data, my answer is at the moment I expect this estimate to hold. When additional information comes in through the month of December which will be available for us in the next month and in January, we will suitably revise the estimate based on the directional impact which we are seeing then. Prashant: Excluding the financial services data, this then does capture, the number that you put out, does capture according to you the slowdown which we are all well aware has happened post demonetisation.
A: I will tell you one thing; one needs to be careful about trying to assess what the effect of demonetisation is because there is very little data available for the period post demonetisation - that is the number of data points which have been collected and reported after November 8 are limited. The effect of demonetisation is to be assessed after all of that data comes in and further also taking into account what the trajectory of the economy was, what the new data reveals and then try to assess what is the likely change in trajectory. It is a very complicated exercise and it is not very simple that after this therefore this much has been the effect of demonetisation, I have been costing people not to make simplistic before after comparisons to try to say that this is what demonetisation has done. Prashant: We will start to get the corporate earnings from tomorrow - that will fill in a lot of the blanks? A: Certainly it will help in filling the blanks and the corporate estimates will come in. A number of companies are trying to make assessments for their third quarter and their assessments will feed into our third quarter estimates. So, those will certainly help in filling in the gaps.
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Anant Concerns have been raised following the announcement of advance gross domestic product (GDP) estimates at 7.1 percent for the first seven months as against 7.6 percent in the last fiscal. Chief Statistician TCA Anant says that higher growth would have been estimated if bank deposits after the roll-out of demonetisation would have been included. TCA Anant (more) Chief Statistician, Govt of India
Concerns have been raised following the announcement of advance gross domestic product (GDP) estimates at 7.1 percent for the first seven months as against 7.6 percent in the last fiscal. Chief Statistician TCA Anant says growth estimate would have been higher if bank deposits post-demonetisation had been included. He said the bank deposit data would have been a short-run fluctuation and therefore, an outlier. Hence, it was kept out of accounting. The dip in GDP estimates versus last year is mainly due to weak industry performance. Corporate earnings data will be out this week onwards and Anant says the assessment will be included in the third quarter estimates and help in filling gaps. As for the nominal GDP revision, which was pegged at 11.9 percent for the current financial year, he said it will largely depend on the inflation rate. Below is the verbatim transcript of TCA Anant’s interview to Prashant Nair and Ekta Batra on Prashant: We got the gross domestic product (GDP) numbers and we heard you were talking about it explaining the background and the context to it essentially telling us that the numbers are for the seven month period, April to October. You have consciously avoided using the November data to forecast the GDP.
Could you explain why you decided to do that? What will essentially fill in the gaps for you to be able to use the data post the demonetisation announcement as well? A: It is not that we didn’t use the data post November. In a specific indicator which is growth in bank deposits, growth in banks credit and bank deposits, we noticed that there was a -- as had been pointed out by many others also, that there was a very sharp rise largely on account of people depositing old currency into the banks. Since this reflected a very sharp rise in growth rate, we felt that this may have been a short run fluctuation and therefore an outlier. Since it was only one month’s data, we decided not to use it at this stage in the banking and financial sector where this indicator is used to calculate the gross value added (GVA) in that sector.
Now, it is of course correct that in the long run the trend of growth in deposits and credits will be changing, but we expect that the number will stabilise in the months to come. It is in that background that we decided not to use the November number. I am as yet not commenting on what would be the position taken in February because you will have to see the numbers as they emerge until then and appropriately a call will be taken on how best to model the estimates for this segment. We will disclose details on that when we have made those assumptions and made the calculations at that time. Prashant: You have not used the data only for the financial services sector you are saying? A: That is correct, in fact in the press note we have explained what data is available. It is true that for the most part there is very little data available for the month of November. Yes, some price data is available and that has been used as is used ordinarily but other than price data, the only other data which is available for the month of November is typically for the financial services and some limited core sector indicators, not all of which are used in GDP computation. However, the ones which are used have been used as in the past. Ekta: It is fair to assume that the CSO might in fact leave out the deposit data for the February estimates which come out on the February 28 as well? A:
It is too early to say anything about that. Ekta: So you haven’t made a decision as yet? A: We have not made a decision on how will the February estimate be computed. We will look at all the data when we are making the exercise for February and then take a suitable call at that stage. Ekta: The services data which you released, some of it had April to November data. I think it was for the trade, hotels and transport which is estimated at 6 percent versus 9 percent for the year. Do you think that there could be a big change from that 6 percent figure that was estimated in this estimate to February 28 based on the incremental information that you are receiving?
A: The estimate which we give at this time is with the exception of financial services where I just explained used all the data which is currently available. Now, based on the data which is currently available, this is what the forecast implies. There is no additional information in so far as data is concerned which allows you to say that which direction will the estimate go in February so to say, do you expect it to remain the same or do you expect it to change, I could answer that only if I had additional data. Since I have no additional data, my answer is at the moment I expect this estimate to hold. When additional information comes in through the month of December which will be available for us in the next month and in January, we will suitably revise the estimate based on the directional impact which we are seeing then. Prashant: Excluding the financial services data, this then does capture, the number that you put out, does capture according to you the slowdown which we are all well aware has happened post demonetisation.
A: I will tell you one thing; one needs to be careful about trying to assess what the effect of demonetisation is because there is very little data available for the period post demonetisation - that is the number of data points which have been collected and reported after November 8 are limited. The effect of demonetisation is to be assessed after all of that data comes in and further also taking into account what the trajectory of the economy was, what the new data reveals and then try to assess what is the likely change in trajectory. It is a very complicated exercise and it is not very simple that after this therefore this much has been the effect of demonetisation, I have been costing people not to make simplistic before after comparisons to try to say that this is what demonetisation has done. Prashant: We will start to get the corporate earnings from tomorrow - that will fill in a lot of the blanks? A: Certainly it will help in filling the blanks and the corporate estimates will come in. A number of companies are trying to make assessments for their third quarter and their assessments will feed into our third quarter estimates. So, those will certainly help in filling in the gaps.
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