The council not just questioned the methodology used by Subramanian to buttress his claim but also rejected the notion that views of experts were not taken into account while changing the methodology for the GDP computation.
The Economic Advisory Council to the Prime Minister (EAC-PM) on Wednesday rejected former chief economic advisor Arvind Subramanian’s claims of massive overestimation of India’s GDP growth between FY12 and FY17 and said it would issue a ‘point-to-point rebuttal’ in due course. It also stated that ‘any attempt to sensationalise 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’.
In a paper titled ‘India’s GDP mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications’, Subramanian had claimed: “Official estimates place annual average GDP growth between 2011-12 and 2016-17 at about 7%. We estimate that actual growth may have been about 4.5% with a 95% confidence interval of 3.5-5.5%.”
The council not just questioned the methodology used by Subramanian to buttress his claim but also rejected the notion that views of experts were not taken into account while changing the methodology for the GDP computation. It said Subramanian has used cross-country regressions to estimate what India’s GDP should be. But 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,” it said.
“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,” it added.