#GDPbkser 1/n Whenever the GDP base is updated for a fast growing economy, the weights on fast growing sub-sectors increase & on slow growing sub-sectors decrease. The new series therefore shows lower growth rt than old in yrs prior to new base & raises it for yrs post new base.2
#GDPbkser (2/n): If memory serves, historically avg GDP gr rt in yrs btwn old & new base yr has been adjusted down by an avg of -0.5% to -0.75%! The current revision is ~2x the historical avg! Thus reweighting would have lowered past GDP gr rt from 8% to 7% to 7.5%! ...3/
#GDPbkser (3/n) So what needs greater analysis is the rest of decrease in GDP growth rate ie the reduction not explained by re-weighting (~-0.65% ). Some points made by critics are either only partially valid or invalid. (a)Comparing chng in nominal gr with chng in real gr...4/
#GDPbkser (4/n) (a) Nominal changes in gr rt of profits/Cos value added/credit cannot be compared with changes in real GDP gr rt. The former must be deflated by inflation to get real company profits/Value added/credit growth & then compared! ...5/n
#GDPbkser (5/n) (b) Invest rate(Ir) has fallen sharply & this is inconsistent with gr acceleration; Nominal rt is misleading bcs GDP deflator has risen much faster than deflator for Investment goods. This means that the real invest rt has fallen much less than nominal(contd)...6/
#GDP (6/n) contd (b)Th real Invest rt decline is due wholly due to decline in Household investment in structures(ie residences,offices, industrial sheds). There's no change in corporate(& other) invest rate in productive assets. (c)Capacity utilization fell & rose in 2010s...7/
#GDP 7/n (c) Capacity utilization fell after 2008 into the 2010s, stabilized at lower levels and started rising recently. Capital Productivity, unadjusted for capacity utilization, therefore fell in earlier periods, stabilized at lower levels and has started rising recently!
#GDP 8/n Deflators are critical elements in getting a real GDP series. About 40% are based on CPI, 30% on WPI & rest on direct volume like road-km. CPI & WPI are based at 2011-12 & don't hv published back series. New CPI showed higher infl than 3 old CPIs & linking method is imp
#GDP 9/n Analysis suggests, critical factor in faster Gr Rt since 2014-15 is dramatic decline in inflation in, (a) trade, hotels & resteraunts & (b) Real Estate, Personal Dwellings & Professional Services; Resulting in a sharp rise in Value added gr in const prices in a&b sectors
