In a recent research paper— India’s GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications— published at Harvard University, Former Chief Economic Adviser Arvind Subramanian has concluded that the country’s growth has been overestimated by around 2.5 percentage points between 2011-12 and 2016-17. While official estimates have pegged average annual growth at around 7 per cent during this period, actual GDP growth is likely to have been lower, at around 4.5 per cent, he said. Subramanian’s paper has led to a raging debate on the growth numbers with the government issuing clarification and the Economic Advisory Council to the Prime Minister (EAC-PM) planning to issue a point by point rebuttal.
What did the government say on Subramanian’s paper?
The government said GDP estimates are based on “accepted procedures, methodologies and available data and objectively measure the contribution of various sectors in the economy”. The methodology of compilation of macro aggregates has been discussed in detail by a committee comprising experts from academia, National Statistical Commission, Indian Statistical Institute, Reserve Bank of India (RBI), Ministries of Finance, Corporate Affairs, Agriculture, NITI Aayog and selected State Government.
What does the EAC-PM say?
The EAC-PM Wednesday said that the Base Year of India’s income calculations shifted to 2011-12 based on recommendations of several committees and it is wrong to suggest that views of experts have not been taken into account. The Council said that the proxy indicators used by Subramanian can also be questioned and his analysis does not allow for GDP increases on the basis of productivity gains. The Council said it will examine in detail the estimates made in Subramanian’s paper and come out with a point-to-point rebuttal in due course. It stressed that Subramanian should have certainly raised these issues while he was working as CEA, though by his own admission, he has taken time to understand India’s growth numbers and is still unsure.