Last week, the International Monetary Fund
revisited its estimates of growth in Indian gross domestic product (GDP) for 2019-20 and 2020-21 and revised them both downwards by 20 basis points, to 7.3 per cent and 7.5 per cent in the respective years. Prior to that, the World Bank had also revised its estimates of Indian GDP growth downwards, to 7.2 per cent for 2019-20 — again, lower by 20 basis points. These estimates are not out of line with the current official growth numbers for the Indian economy
reported by the Central Statistics Office and are dependent, according to the two multilateral agencies, on certain policy steps that would step up the growth momentum over the next two years. Even so, however, one question should be asked: What provoked the downgrading? After all, neither the World Bank nor the IMF has independent data collection sources on the ground in India. So it is unclear what additional data triggers a downward — or an upward — revision to the growth forecast by either agency.
This is a larger issue that speaks to the reliability of the growth forecasts from multilateral agencies. In a situation in which official statistics are increasingly coming under question, it is natural for many observers of the Indian economy
to turn instead to “independent” sources for answers as to what is happening to macro-economic variables. However, if those independent sources are not clear as to why their estimates are better sourced and more reliably calculated than official statistics, then it is not certain why they would help anyone. What precisely is the relationship between the official headline numbers for growth issued by the CSO and the multilateral agencies’ predictions? The World Bank is, for example, clear that it uses for its data tables the local-currency data issued by each country. If so, what changes to its methodology does it make to ensure consistency when methods of calculation by domestic statistical agencies are changed, as has controversially happened in India? And what additional data could have come in that caused a change in forecasts? There should also be some accountability for problematic past forecasts. The World Bank and IMF should consider listing its past forecasts and the eventual outcomes for growth while providing an explanation, if any, for the diversions. This will provide accountability for its analysts and transparency to observers.
There are other questions that should also be asked about the World Bank and IMF GDP numbers. For one, the World Bank says that India’s GDP in 2017 was $2.6 trillion and its GDP in purchasing power parity (PPP) terms was $11.9 trillion. This is a PPP scale-up of 4.76. But, in the same year, the World Bank claims Bangladesh’s PPP GDP was $637 billion while in real terms it was $250 billion. This is a scale-up of only 2.54. The difference is so stark as to be questionable. In other years and for other similar peer economies it can be even starker. Questions of PPP size and per-capita power are increasingly important in international negotiations. These anomalies should also be better explained.