Arvind Subramanian Claims India May Not Have Been Fastest Growing Economy Between 2011-12 And 2016-17

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New Delhi:  Former chief economic adviser Arvind Subramanian has deduced in a new research paper that India may not have been the world’s fastest growing economy between 2011-12 and 2016-17 as its GDP growth rate was overestimated, a claim the government quickly rubbished saying its estimates were based on accepted procedures and methodologies.

India’s gross domestic product (GDP) growth rate between this period should be about 4.5 per cent instead of the official estimate of close to 7 per cent, Narendra Modi government’s former CEA said in the research paper, published by the Center for International Development at Harvard University.

“India changed its data sources and methodology for estimating real GDP for the period since 2011-12. This paper shows that this change has led to a significant overestimation of growth,” he said. “A variety of evidence suggests that the methodology changes introduced for the post-2011 GDP estimates led to an over-estimation of GDP growth.” Manufacturing is one such sector where the calculations have been largely mismeasured, wrote Subramanian, who quit as the chief economic adviser in August last year before his extended tenure was to end in May 2019.

Stating that his research paper by no means was the final word given the impossibility for researchers to reproduce the detailed methodology underlying the GDP estimates, he said, “That said, the evidence is too broad and robust, the anomalies and puzzles too numerous, the magnitudes of over-estimation too large, and the stakes for the economy and country too high for this evidence not to be debated seriously.” He said if statistics are potentially misleading about the overall health of the economy, they influence the impetus for reform in serious and perverse ways.

The apparent puzzle of ongoing and intensifying corporate and financial system stress, weak new project announcements, and persistently low capacity utilisation in manufacturing point towards overestimation of GDP growth, he said.

The quality and integrity of data need to be improved and India must restore the reputational damage suffered to data generation across the board -- from GDP to employment to government accounts -- not just by conferring statutory independence on the National Statistical Commission, but also appointing people with stellar technical and personal reputations, he added.

“At the same time, the entire methodology and implementation for GDP estimation must be revisited by an independent task force, comprising both national and international experts, with impeccable technical credentials and demonstrable stature,” he said. “If statistics are sacred enough to require insulation from political pressures, they are perhaps also too important to be left to the statisticians alone.” Commenting on the paper, the Ministry of Statistics and Programme Implementation said it has from time to time released details explaining the complexities involved in GDP compilation.

India, it said, follows UN-adopted System of National Accounts 2008 (2008 SNA). “As with any international standard, the data requirements are immense and diverse economies like India take time to evolve the relevant data sources before they can be fully aligned with the SNA requirements. In absence of data, alternate proxy sources or statistical surveys are used to estimate the contribution of various sectors to the GDP/GVA,” the statement said.

 

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