Patna, Oct. 14: Riding on the downward revision of the size of the trade and hospitality sector because of a flaw in estimation and subsequent downsizing of gross state domestic product (GSDP) in the financial year 2010-11, the GSDP registered an overwhelming 16 per cent growth in the 2011-12 fiscal.
Many heads turned in July this year when the quick estimate for the GSDP for the 2011-12 fiscal was released. But the growth percentage would have been much lower (around 7 per cent) had the state not revised the GSDP figures for the previous fiscal after the Centre pointed out a major flaw in the system of estimating the size of the trade and hospitality sector, constituting about a fifth of the state’s gross domestic product.
The state government machinery, which collects data on behalf of the Centre, estimates the size of a sector on the basis of the tax collected from it.
In the trade and hospitality sector, instead of calculating the tax collection figures on the basis of the current prices, those collecting the data presumed it was being collected on the constant prices. Subsequently, they inflated the figures in accordance with the estimates of the current prices, leading to swelling of figures.
While calculating figures on the constant price, the 2004-05 fiscal is taken as the base year. The current figures are adjusted downward according to the price-level of the base year for calculating the figures of a given fiscal on the constant prices.
An official closely associated with the data churning for the calculation of the GSDP said: “If one collects Rs 100 as tax in a given year from a given sector, it is always collected on the current prices and not the constant prices. While estimating the size of the sector on the constant prices, the tax amount should be deflated accordingly.
“In the trade and hospitality sector, just the reverse was happening. It was being presumed that the tax was being collected on the constant prices and the necessary deflation was not being done, leading to distortion in figures of the GSDP,” he added.
As soon as the Centre pointed out the anomaly, figures were corrected and the revised GSDP data of the past years were released. While releasing the quick estimates of GSDP for 2011-12, the correct exercise was followed from the beginning.
Admitting the mistake, the official said the GSDP revision was not something extraordinary and it happened with other states also.
The experts differed, though. “It is a very serious mistake. Once one learns about it, the 16 per cent growth rate would appear just a misnomer,” Asian Development Research Institute director and economist P.P. Ghosh said.
Economist N.K. Choudhary appeared more aggressive in his comment on the issue. “It is not only a flaw but a fraud on the people of the state. I have been expressing doubts over the growth figures of the economy from the beginning,” he said.
He said the state government should come clean on the issue and set up a committee of experts to look into the whole process of data collection so that such mistakes were not repeated in the future.
The RJD reacted very strongly on the issue. Leader of the Opposition in the Assembly Abdul Bari Siddiqui said: “We have pointed out the hollowness in the state government’s growth claims several times. Had the claims been genuine, this government would not have pleaded with the Centre to revise its figures of below poverty line families in Bihar. Had pro-poor development taken place, the state government would not have to come up with such a plea.”
Repeated attempts to contact deputy chief minister Sushil Kumar Modi, also the finance minister of the state, for getting the government’s view on the issue proved futile.