In the midst of a raging controversy over India’s economic growth under the new GDP series, 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, says Subramanian in a recent research paper published at Harvard University. It forms the basis of his piece in The Indian Express today.
One sector where the magnitude of mis-measurement is particularly large is manufacturing. Pre-2011, manufacturing value added in national accounts tended to be tightly correlated with the manufacturing component of the index of industrial production and manufacturing exports. But, thereafter, the relationship has broken down, notes the former CEA.
Subramanian’s analysis is based on 17 key economic indicators which tend to be highly correlated with GDP growth. However, it does not include the controversial MCA-21 database which forms an integral part of the CSO’s calculation.
His findings, Subramanian argues, have key implications. “The Indian policy automobile has been navigated with a faulty, possibly broken, speedometer,” he writes.