Pakistan’s biggest problem is institutional derailment; and that gives more weight to individual opinions who are expert on the subject matter. However, individuals always have biases that cloud their judgment. The problem is widespread across all the key economic and governance institutions; and PBS is no different.
Every now and then, one or the other economist comes up with his own calculations of GDP, CPI and other measurement by allegedly falsifying the figures posted by government institutions. In almost all cases, when these economists or experts are at the helm of the affairs, their stance on certain variables computation or policy adaptation are poles apart from the view they possess when they are not.
As long as the view is on certain policy stance - such as on monetary policy or any other policy for that matter - it is constructive as it could help in forming the right policy framework. However, when it is on computation of numbers, it creates mistrust of business community and other stakeholders on published data by the institutions; not to mention the foreign investors who sway further away from investing in the country.
It has been observed that when a person is at a key post of a certain economic institution for years; he is generally not vocal through his words or policy formation to correct the issues he is dealing with day in and day out. But right after he or she is out of action, the critical commentary on the issues is all over the media.
On the other hand, it might also be true that the expert is talking for the betterment of country with no personal agenda, while the government officials might have maligned intention to rework the numbers to show better performance. The suspicion is that everyone is running his or her own agenda and the logic is twisted accordingly to boast about one’s own importance.
But we need to give respect to institution without generalising one way or the other. The issues need to be picked up by experts on how to improve the institutions. Yes, PBS methodology is below the mark and it relies on data sources that may not be a true reflection of actual numbers or ground realities. Yes, there might be maligned intentions of economic managers to show rosy picture to artificially boost their performance. But, inherently, the problem is with institution’s lack of capability to portray the real picture. Hypothetically, there are equal chances of understating the number as of overstating.
The GDP in fact might be understated on provisional FY18 numbers; for details read understated GDP published on 17th April, 2018. The PBS in most cases rely on data provided by other economic players. For instance, LSM production is based on surveys. If the respondents of the surveys do not report back data completely and truthfully, the surveys would not reflect the true picture. 
The data is provided by companies, and in Pakistan the usual practice is to under report data to evade or avoid taxes. This logic implies that LSM might be understated. Even PAMA numbers are not a complete representation of auto sector production, because some Chinese players are not members of the association. Thus, official numbers are understated.
Then there is variation in data provided by one group from the other even when both are using same data sets. For example, PBS takes data from the OCAC to track petroleum products production for LSM - but it always varies from OCAC’s own numbers.
Every year, the small scale manufacturing (SSM) grows between 8-8.5 percent - in FY11 when LSM growth was 1.7 percent, SSM was 8.5 percent; and in FY18 with LSM of 6.1 percent, SSM is at 8.2 percent. There has to be some correlation of LSM with small scale manufacturing growth. But PBS works on estimates; if SSM was overstated in FY11, it could be understated in FY18. Similar is the story of livestock, forestry and slaughtering.
In commodity producing sectors (agriculture and manufacturing), barring the measuring of major crops, all the remaining data is a proxy based on surveys and vague estimates. In case of services, the argument presented by a few is that services sector growth is overstated as commodity sector growth is inflated. Conversely, if commodity sector is understated, then the services sector actual growth should be higher than PBS numbers.
Then in services, current GDP methodology does not measure private health and education adequately, and it does not take full account of digital economy. The whole sale and retail trade growth could be understated, seeing the double digit bottom-line growth of listed consumer companies.
Apart from these, there is a whole argument of enhanced informality in the economy since July 2016 when the non-filers were started being penalized by higher taxes. Had the currency in circulation and prize bond ratios not changed since then, the formal economy could have increased by Rs944 billion or 2.7 percent of GDP. During that time, when informality in the economy increased, the GDP growth picked up too. This implies that the formal economy is not fully reflecting the economic growth.
The GDP deflator, which is the best indicator of inflation, grew by 0.45 percent and 3.96 percent respectively, in FY16 and FY17. On the flipside, CPI stood at 2.9 percent and 4.2 percent in FY16 and FY17, respectively. In FY18, the CPI is expected to be around 4 percent while the GDP deflator is showing 2.05 percent. Due to low GDP deflator growth, the nominal GDP is not growing much, which is increasing ratios like fiscal deficit and debt numbers as percentage of GDP.
It’s all hotchpotches. PBS computes numbers based on fixed tables and relies on surveys to compute most important economic numbers. The debate should be on how to make the institution of PBS transparent and reliable rather than tweaking fixed tables to come up with one’s own desired estimates. Now the GDP rebasing exercise is underway; it is time that the PBS corrects all the anomalies once for all.
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