Has India Plunged Into Recession? GDP Data Fudge Reveals Details


The Great Indian Data Suckage story continues. GDP data from MOSPI (the agency that reveals data) recently brought growth down to 5.3% and it turns out there is something really shady about that as well. From the chart:


The concept is

GDP = Govt Expenditure + Pvt. Consumption + Change in Inventories + Investments + (Exports-Imports)

It’s obvious that Exports add to GDP while Imports subtract from GDP.

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Export Growth (Real, that is, inflation adjusted) was shown at 18% while Imports supposedly grew at 2% only.

Goods and Merchandise Exports

That doesn’t match the data sources we have. The Ministry of Commerce provides data every month, about goods exports. That data is in the RBI Bulletin and in the Commerce Min press releases , which I’ve used to collate export data: (here and here)

(Note: Rs. 1 crore or 1 cr. = Rs. 10 million)


The first three rows are the goods exports data. Exports grew just 5.89% in FY 2012 compared to FY 2011 (Fourth Quarter), while Imports grew 34% in the same period.

GDP data includes both Goods and Services Exports, so the “Difference” must be the Service exports.

Service Export Data

Service export-import data is in the Balance Of Payments Report, which is released with a one quarter lag by the RBI. We won’t know the March 2012 quarter service data until June 30, but we can take a guess that it won’t be hugely different from earlier.


Which means we can extrapolate from this, and say that by and large, service exports (largely software and consulting services) amount to about 50% of goods exports. Service Imports are about 20% of goods imports.

The Jan-Mar Quarter shows Service data (the Difference Row highlighted in red above) as HUGELY off the earlier numbers. Service Exports, according to MOSPI’s release, were 69% of goods exports, while service imports were only 15% of goods exports.

This doesn’t quite match the earlier numbers. Plus, if we had a massive export boom in Q4, we would have noticed it somewhere – in software exporters numbers (nearly all numbers show benign growth) or in massive bonuses from consultants or such. The dramatic drop in service imports (From 122,000 cr. to 15,000 cr.) should have shown in Travel, Transport, Financial or Business Services – companies should have gone bust spectacularly if such a fall was true.

Given that MOSPI has been wrong many times earlier, let’s assume they’re wrong this time and recalculate GDP.

Revised GDP Calculation

If we redo the calculation so that GDP growth uses actual figures, we get something startling:


Nominal growth (that is, including inflation) in Q4 falls to 3.86% in March 2012, for the quarter.

Consider that to arrive at “real” growth we must reduce the GDP number by a deflator. It’s complicated to calculate the actual deflator, but let’s assume the same deflator that the MOSPI used (which is based on the Wholesale Price Index or WPI). That deflator is about 6.92%, and corresponds approximately with data of the WPI in those months. (6.89%, 7.36% and 6.95% for Jan/Feb/Mar respectively)

Using that figure, we see that Real Q4 GDP Growth is now negative at -3.06%.

If true, India is slipping into recession. We’ll probably never know because no one ever tells us how these figures are arrived at, and there is so much money laundering in the export/services route. But what it does mean, regardless of whether you agree with the R word, is that the situation is much worse than they’ll have us believe. Our growth – though positive – is still lesser than inflation, and that means we’re shrinking.


1. You might say that listen, we need to do this calculation and adjust March 2011’s figure (of last year as well). My preliminary calculations show that the same calculation applied to 2011 would actually increase 2011 GDP. Last year’s figures are understated, it seems. Note that there has been an upward revision of 27,000 cr. in the import number (which takes down last year’s GDP and thus increases the GROWTH number).

2. I might be wrong, so please correct my calculations if you have data that is more accurate. All data is from public sources (RBI, MOSPI).

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  1. Without fail, you continue to show stellar analysis and connect the dots to present the big picture. To me, you are like the David Einhorn of India :-)
    That’s why I keep coming to your posts when trying to look at the real picture and get past obfuscation by official stats or shoddy business journalism!

    Keeping them honest!


  2. Hi Deepak,
    Mohit pointed me to this calculation on Facebook, which is pretty frightening. One possible difference between the way the government calculates GDP and you calculate GDP is the inclusion on inventories as a separate head in your calculation. Maybe ‘investments’ includes investments made in inventories; if that’s the case you’ve calculated inventories twice. I can see that inventories dropped precipitously year on year in Q4 FY12, and if that figure is removed from the equation, the government’s GDP statement might look a little more realistic.

    • Girish,
      For lack of space, I couldn’t write it – it’s “change in inventories”. Also, my definition of GDP is exactly the same as the govts (you can see that you have to add up Investments and Inventories to the rest to arrive at the bottom figure, GDP at market prices, in their own press release). Change in inventories is kinda-sorta expected when you have high inflation and low growth – companies attempt to use up their existing stock and replenish as little as possible since demand is waning and cost of building inventory is high.

  3. Thanks, Deepak. Could you provide a link to that government press release? I’m sorry, it’s probably on this page somewhere, but I can’t find it.

  4. Deepak, the charts in your link, as far as I can tell, speak of Gross Fixed Capital Formation and not of total private investment. So, yes, if GFCF is a heading in the calculation, Inventories have to be calculated separately. But in your calculation, you haven’t taken GFCF, but ‘Investments’, which, normally, include change in Inventories. I don’t know if your ‘Investments’ head is actually the same as the government’s GFCF head, and you’ve merely labelled it differently. But they’re usually two separate things, as far as I know; and the ‘Investment’ head used in most GDP calculations includes inventories. Maybe I’m wrong, but it’s one way of reconciling your figures with the government’s.

    • Girish, it’s just a relabel (GFCF is just relabeled as investments – there is no other source of investments that I’ve used.) All GDP calculations worldwide take inventory changes separate from investments . What is usually clubbed is “Change in Valuables” with Change in Inventories (we report it separately but the Valuables part is a minor item till now)

      It isn’t that my calculations on GFCF, Inventories, valuables etc are different. I take those at face value, though they may be of questionable standard. The problem is that import/export data is way off, and if you use other government or public sources (Commerce Ministry for exports, RBI’s balance of payments reports) you find that the anomaly is huge; just backing out the Export/Import figures to what other public sources state gives you a GDP picture very different from MOSPIs)

      • OK, so you’ve just changed the label, in which case I suppose, ‘valuables’ should also be a separate entry. However, that’s academic because I get now that you haven’t recalculated at all. The export-import data certainly look dubious, indicating we actually exported more than we imported in FY12 Q4.

        • Yes I ignored valuables (actually, change in valuables) only because it wasn’t quite that significant earlier. I only bothered about the imp/exp data. That export surplus is very strange indeed.

  5. Hi
    interesting calculation.
    However, I would like to ask a question that you have already asked in other context. If indeed we are in a recession then should it not reflect in quarterly results of companies?

    • Oh it has. The number of companies plunging into losses is at a record high and profit growth has been negative (at a consolidated level) for the last two quarters.

  6. Excellent analysis to connect the dots. It’s highly likely that our growth is not what is reported by the Govt. but frightening to think that it has regressed. What else could we expect from a paralyzed government especially with prevailing euro conditions and still limping US of A?

  7. Hi Deepak, If this is true – then yes that’s shocking. But i agree on one point – we cannot trust any Govt data. The best analysis may come from tracking Core Corporate earnings…because that’s real…I hope

  8. Deepak,

    A simple answer to your question as also pointed out in the article posted above…..

    1) GDP is “calculated” by factor cost method…

    2) GDP is “estimated” by consumption-expenditure method….

    And in the second method the (X-M)…..(Export-Import) is a plug or a balancing figure….

    (Just like Cash is usede as a plug by many analysts in a Fin. Model to balance the Balance Sheet)

    Obviuosly…I agree the plug they are getting is not efficient and shud match actual Trade numbers in an ideal world…..

    But the mistake we are doing is….. adding “estimates” (i.e. CIG—consumption + inv ) to an “actual figure” (Trade data which is obviously negative)…..obviously we cannot do that…..

    • Heh, Even factor cost method is largely an estimation because they hardly get any idea of what value is eventually added. Yet, the figures need to balance out. In the cons-exp-GFCF method there is an element called “Discrepancies” where any mismatches should go.

      Export-Import is not the balancing figure – it shoudl be Discrepancies where minor errors are worked out. Exports minus Imports should reflect the trade balance (actually trade in Goods+Services) and not anything else – there is no point putting a Net Export Figure if you don’t intend to put net exports in it (and then, why do we have a discrepancies number to iron out?). No, the deal is that in the past, these numbers do eventually reflect the trade balance, and this time they don’t reflect it at all.

      Estimates need to have some semblance of reality otherwise it’s just monkeys on excel sheets.

  9. Hi Deepak
    Very very thought provoking. I have only one query- i seem to remember before the internet made all info available online- we used to look at RBI bulletin books to see BoP data and get trade balance from DGCI&S releases. there was some sense that we could not compare even merchandise trade data (the common link between the two sets) because exports are quoted FOB and imports CIF for DGCI&S, whereas RBI data is not like that. Could that account for this discrepancy? Have u checked that out?

  10. I agree with Ankit. GOI can get away with it by reporting GDP on ‘factor cost’ basis, where Export-import doesn’t get reflected.

    But the shocker is the blatant reporting of export surplus in the GDP expenditure break-up. Even in previous years, there was a huge deficit and I don’t know how they could believe that there’s a surplus this year. Compliments on spotting this and reporting.

  11. hi deepak sir
    found this information and calculations very insightful, i am a 2 sem MBA student and doing a project on” IF INDIA IS IN RECESSION ” basically a amateur in economy but want to understand this just like the pro’s, if u could point out the key area’s in your article above i will be able to understand it better and if u could explain this in simple layman’s language that will be a lot of help. A short detail and if u could send it to alcanther.rahul@gmail.com i will be much thankful


  12. search for Truth is a never ending process.

    Good luck to you!

    Gopinathan Krishnan,( a Scientist belonging to India, part of the “7 th world”):
    P.S. Pl do not contact.

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