The Economic Advisory Council to the Prime Minister (EAC-PM) on Wednesday, 19 June, refuted claims of former Chief Economic Adviser (CEA) Arvind Subramanian regarding overestimation of GDP numbers and came out with a ‘point-by-point rebuttal’.
In a note released on Wednesday, the EAC-PM defended its method of GDP calculation by saying that it is in line with advanced countries.
As far as Subramanian’s observations are concerned, the note suggests that the former CEA’s paper “lacks rigour in terms of specific data sources and description,” adding that it will not “stand the scrutiny of academic or policy research standards.”
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The note also says that Subramanian's paper has been drafted by 'cherry-picking' a few indicators and thus, does not give the full picture. The note further finds flaws in Subramanian's observations by detailing how he has drawn the 'wrong conclusions' on the 17 indicators he has mentioned in his paper.
Countering Subramanian's claim that India's GDP grew at rate of 4.5 percent and not 7 percent between 2014-17, the note says:
“Subramanian can certainly argue that a 7% growth claim has a smell problem. But his 4.5% estimate fails the smell test too. India has many problems but displays nothing like the economic disaster that 4.5% growth would imply.”
Earlier this month, Subramanian, in a paper, said that India’s economic growth rate has been overestimated by around 2.5 percentage points between 2011-12 and 2016-17 due to a change in methodology for calculating GDP.
What Subramanian’s Paper Claimed?
In a research paper published at Harvard University, the former CEA trimmed the GDP growth to around 4.5 percent, even as the official estimates pegged average annual growth at around 7 percent during this period.
“My results indicate that methodological changes led to GDP growth being overstated by about 2.5 percentage points per year between 2011-12 and 2016-17, a period that spans both UPA and NDA governments.”Arvind Subramanian, Former Chief Economic Adviser
Subramanian's analysis was 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 Central Statistics Office’s calculation.
The former CEA also compared India with other countries. “For a sample of 71 high and middle income countries, I estimate a relationship between a set of indicators and GDP growth for the pre and post-2011 periods,” he wrote.
(With inputs from PTI)
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