Arvind Subramanian’s GDP bombshell: Prominent economists divided over maths

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Published: June 12, 2019 11:43:31 AM

After former Chief Economic Advisor Arvind Subramanian’s research paper re-started debate on GDP data, comments from other prominent economists have also started to pour in on the issue.

The ministry also said initial estimates of GDP tend to be conservative and the revision occurs when data coverage from administrative sources improves over time and get well documented.While some support the analysis and call for an independent committee to examine the data, others raise questions over the calculations.

After former Chief Economic Advisor Arvind Subramanian’s research paper re-started debate on GDP data, comments from other prominent economists have also started to pour in on the issue. While some support the analysis and call for an independent committee to examine the data, others raise questions over the calculations. P C Mohanan, former acting Chairman of the National Statistical Commission and R Nagaraj, a professor at Indira Gandhi Institute of Development Research, asked for the review of the entire GDP revision process.

However, Pronab Sen, former Chief Statistician, said that the volume indices that were being used before the new methodology was adopted don’t take into account productivity and value addition. It is likely that a 7 per cent GDP growth rate is because of 4.5 per cent volume growth and the remaining 2.5 per cent owing to productivity, and this in no way makes it an overestimation, he also said.

The research is mainly based on an analysis of indicators such as electricity consumption, two-wheeler sales, etc. and associated assumptions, said MoSPI.  In absence of any revision of base in view of fresh data source becoming available, the comparison of the old and new GDP series is “not amenable to simplistic macro-econometric modelling”, it added.

Arvind Virmani, a former CEA, tweeted:

Noted economist Surjit Bhalla said:

Arvind Subramanian’s research paper

The former Chief Economic Advisor Arvind Subramanian, in his latest research paper published at Harvard University, had concluded that India’s GDP growth rate has been overestimated under both UPA and NDA rule. The overestimation is of about 2.5 per cent and the actual growth may be lower, at nearly 4.5 per cent, down from 7 per cent between 2011-12 and 2016-17, he had said. The conclusion is based on an analysis of 17 key economic indicators that are highly correlated with the GDP growth.

This also took a political turn with Congress party tweeting:

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