The latest quarterly estimates of gross domestic product by the new National Accounts Statistics methodology are once again in the news for the wrong reasons. With inadequate accurate information available on a quarterly basis, the estimates hardly represent the state of the economy and reflect the effects of demonetisation over the October–December 2016 period.
Price inflation in India as measured by the Wholesale Price Index and the Consumer Price Index has shown diverging trends. While WPI indicates a disinfl ationary situation for 16 months, CPI indicates inflation. Explaining the construction of the two indices, the trends of subgroups of both indices are presented. It is found that the different sample sizes and weightages of commodity groups of both indices and price interventions in the market explains, at least in part, this odd situation of infl ation along with disinfl ation.
Amid the chaos around the new gross domestic product figures put out by the Central Statistics Office, profound improvements made in another prominent statistical marker--the Consumer Price Index--also compiled by the CSO, went unnoticed. The CPI series was revised to a more recent base year, 2012. This alone probably deserves commendation as base years of other national price indices have grown significantly remote. It is indeed a tectonic shift in estimation procedure and conforms to international best practice concerning CPI. Here we discuss the decision of CSO to replace the arithmetic mean with the geometric mean in the updated CPI indices by going through each of the established approaches to index number theory used to identify the appropriate formulation to calculate basic indices.
Two recent press releases by the Central Statistics Office substantially revise the new series of National Accounts Statistics. The new releases are more than just routine updates, and entail methodological changes and incorporate new sources of data, perhaps in response to various critiques. Yet, on comparing the advance estimates released with past such estimates, the CSO's latest growth projections once again turn out to be far too optimistic.
