Backward revision of GDP growth

In the following eight years, the annual GDP growth has been 3.73 per cent

Dr Pervez Tahir February 10, 2017

In a latest publication, the Pakistan Bureau of Statistics (PBS) has finally done what should have been done a long time ago. The base of GDP estimation was changed from 1999-2000 to 2005-06 in April 2013. Base change is necessary to accommodate changes in the structure of the economy, new definitions, methods or latest surveys. Any or all of these adjustments make the pre- and post- base data incomparable. Before the latest backward revision, our GDP series was consistent only from 2005-06 to 2015-16. Now it has been made consistent since 2000-01. The 1980-81 base continues from 1951-52 to 1999-2000. Different bases hold prior to that. Statisticians have developed methods to solve this problem, but the PBS has been slow in catching up. The revision enables us to compare apples with apples.

There is no revision in forestry, fishing, mining and quarrying, and construction sectors. The revision incorporates structural changes in the large-scale manufacturing. In the crops sub-sector, both structural and data changes have been incorporated. Livestock sub-sector is adjusted for new data. Data changes have been made in slaughtering. Structural and data changes affect electricity generation and distribution and gas distribution. Wholesale and retail trade is changed to the extent other sectors have changed. Transport sub-components have been updated. While minor changes occur in general government services and other private services, the methodology for finance and insurance services has completely changed. On the whole, the areas where the information base has been traditionally weak remain untouched. But their weight is far less than the sectors subjected to revision.

Without going into the merit of the changes made in terms of data, definitions and methodology, which may get too technical for a newspaper column anyway, we will only look at the outcome of the exercise. The period covered, 2000-01 to 2005-06, relates to the six full fiscal years of General Musharraf ‘s regime. The General’s first year, according to the old base, was a year of dismal growth of 1.97 per cent. As population growth was higher, the GDP per capita growth was negative. Under the new base, the growth is estimated much higher at 3.65 per cent. This is in the nature of a technical improvement as the year bears the full effect of the changes. In the following year, GDP growth with the new base is 2.37 per cent, which is lower than the growth of 3.11 per cent at the old base. For the succeeding two years, the growth rate at the new base was higher than at the old base. The fifth year, 2004-05, had posted a growth rate of 8.96 per cent at the old base, the highest since 1969-70. At that time, the estimate was the subject of much controversy, as it was made the basis drastic reduction in the poverty number. The new base reduces this growth to 7.52 per cent. According to the old base, GDP growth was the highest in 2004-05. As per the new base, the highest growth was in 2003-04, i.e., 7.70 per cent. In 2005-06, the GDP growth under the new base was again lower than the old base, 5.56 per cent against 5.80 per cent.

On the average, the GDP growth during these six years was 5.34 per cent per annum under the old base. The new base gives a slightly higher estimate of 5.41 per cent. For all the eight fiscal years of General Musharraf, the annual average growth was 5.37 per cent. In the following eight years, the annual GDP growth has been 3.73 per cent. Is this an odious comparison?

Published in The Express Tribune, February 10th, 2017.

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Rahul | 7 years ago | Reply Pakistan showed similar growth under the Ayub Khan regime and the Zia-ul-Haq regime. The point to note is that in all 3 periods Pakistan got that growth by becoming a front line state in American wars and it is still paying the price for that.
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