The Economic Advisory Council to the Prime Minister on Wednesday published a rebuttal of former Chief Economic Advisor Arvind Subramanian’s claim that the growth of the Gross Domestic Product between 2011-’12 and 2016-’17 was much lower than estimated.
“In June 2015, the Central Statistics Office came up with a revised methodology to evaluate India’s GDP,” the council’s note read. “It presented various arguments to shift away from the old series and rightly so. It started using a new base year (2011-’12) along with certain other changes, given better availability and reporting of data.”
The council said the process of changing GDP estimation methodology began in 2008, when the advisory committee on National Account Statistics formed five subcommittees for the purpose. The subcommittees recommeneded two major changes: incorporation of MCA21 database in place of Annual Survey of Industries, and incorporation of the Recommendations of System of National Accounts.
The council said that in addition to this, the new GDP series also considered differential productivity of workers as opposed to the old series, which assumed that all categories of workers engaged in an economic activity contribute equally. The new GDP series also used different weights for various sectors of the economy for analysing the growth rate, the council added.
The council said other countries have switched over to the System of National Accounts method for calculating GDP data. “This switch led to increases in GDP in some OECD countries, reductions in others,” it said. “On balance, more countries had increases than decreases. If there has been an increase in a country, that doesn’t mean GDP numbers are false and untrustworthy. The reason is that over time improvement in data sources help to expand the coverage of activities, hence it should not be confused with over-estimation.”
The council said its authors rejected Arvind Subramanian’s claims in the paper he published and the article he wrote in The Indian Express, and said the paper “lacks rigour”. “A critique of official GDP estimates must specifically critique coverage or methodology, the author does neither,” it claimed. The council also pointed out that Subramanian’s paper has not been peer-reviewed.
Subramanian had said last week that India’s economic growth was overestimated by 2.5% points per year between 2011-’12 and 2016-’17, a period when both the United Progressive Alliance and National Democratic Alliance governments were in power. The economist wrote in The Indian Express that official estimates pegged average annual growth during this period at about 7%, whereas actual growth may have been 4.5%.
The prime minister’s advisory body then accused the former chief economic advisor of attempting to sensationalise the matter, and said this was undesirable “from the point of view of preserving the independence and quality of India’s statistical systems”.
In May, the government had announced that India’s growth rate had declined to 5.8% in the last quarter of the financial year 2018-’19. This was the slowest pace of growth in 17 quarters.