The Prime Minister’s Economic Advisory Council (PM-EAC) on Wednesday refuted claims by former Chief Economic Advisor Arvind Subramanian’s claim in GDP (Gross Domestic Product) estimates.

Subramanian, in his paper titled “India’s GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications” published earlier this month, said that the growth estimate between 2011-12 and 2016-17 was overestimated. He claimed GDP growth rate during this period should be about 4.5 per cent instead of the official estimate of close to 7 per cent. This has already been denied by the Government on Tuesday.

Also read:India’s GDP growth overestimated by 2.5%, says former CEA Arvind Subramanian

“India changed its data sources and methodology for estimating real GDP for the period since 2011-12. This paper shows that the change has led to a significant overestimation of growth,” he said while adding that a variety of evidence suggests that the methodology changes introduced for the post-2011 GDP estimates led to an over-estimation of GDP growth.

According to a statement by PM-EAC, issued on Wednesday, it is worth noting that the base year of India’s income calculations shifted to 2011-12 on the basis of recommendations of several committees with experts in National Income Accounting. It was on the basis of these recommendations, started in 2008, that the Government implemented the change from January, 2015. Therefore, “it is wrong to suggest that the views of experts have not been taken into account while changing the Base Year or weights or switching from Annual Survey of Industries (ASI) to Ministry of Corporate Affairs (MCA) 21,” it said.

In his paper, Subramanian has used cross-country regressions to estimate what India’s GDP should be. PM-EAC felt that using cross-country regressions to estimate GDP is a most unusual exercise, as is the suggestion that any country’s GDP that is off the regression line must be questioned. The proxy indicators that he used can also be questioned. Nor does this exercise allow for GDP increases on the basis of productivity gains.

A country’s GDP is in nominal terms and any exercise should be on the basis of nominal figures, not real growth rates. The Economic Advisory Council will examine in detail the estimates made in Arvind Subramanian’s paper and come out with a point-to-point rebuttal in due course.

At the moment, it is felt that any attempt to sensationalize what should be a proper academic debate is not desirable from the point of view of preserving the independence and quality of India’s statistical systems, all of which the former CEA is familiar with. These are certainly issues that Subramanian must certainly have raised 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, PM advisory body said.

Related Topics
comment COMMENT NOW