GDP Puzzle Solved

New sector expands at breakneck speed

On February 28, the Central Statistical Organisation (CSO) came out with Advance Estimates of GDP for October-December 2017. However, the CSO’s startling claim that GDP grew by 7 per cent during the very quarter in which the Reserve Bank withdrew 86 per cent of the cash in circulation, i.e., that demonetisation had simply no effect at all on national income, has evoked widespread disbelief.

There had been widespread reports of closure of small scale industries throughout the country, from Aligarh to Ludhiana to Bhiwandi; how then did manufacturing Gross Value Added actually rise 8.3 per cent in the third quarter? The fact that “private final consumption expenditure” actually rose handsomely, indeed even grew as a percentage of GDP, during a period in which no one had cash to spend, has occasioned some rather harsh criticism of the official statistical machinery.

We raised some of these questions with a senior official in the CSO. In response, he pointed out that many economists had failed to take note of a significant new sector, namely, manufacture of statistics. According to latest data from the CSO, statistics manufacture surged 243 per cent in the third quarter and 274 per cent in the fourth quarter, averaging an extraordinary 202 per cent for the full year.

Statistics may have a small weight in the manufacturing sector, but its runaway growth in the last two years has pulled up the sector as a whole, and buoyed optimism amid an otherwise gloomy industrial scene. “Perhaps no other industry has responded as swiftly to the Prime Minister’s call to Make in India”, our source observed.

Unlike some other industries, statistics manufacture faced no problem of demand during demonetisation. “On the contrary. It was precisely during this period, and thereafter, that we experienced an unprecedented surge in demand for manufactured statistics. We could hardly keep up with orders, which, of course, are solely from the Government.”

We had expected the statistics manufacturing site to be a buzz of activity, with swarms of sweating statisticians. We were surprised to see that the entire process is fully automated, and consists of one intern with a laptop. For the last two years, the new (2011-12) GDP series has shown that it can generate much larger output with more frugal use of statistical raw materials, but the latest data are a considerable advance in reducing inputs. “It’s a remarkable innovation. We can now manufacture numbers from virtually nothing”, noted the official.

While that explains the performance of manufacturing, how did he account for the unusually strong performance of other sectors in the third quarter, for example, trade, hotels, transport, and communications? “Statistics manufacture has a multiplier effect”, the official explained. “We simply multiply the figures for other sectors.”

The above article is satirical, and should not be taken literally. That we need to mention this fact is itself material for satire.