New Delhi: The Prime Minister’s Economic Advisory Council (PMEAC) has come out strongly against former chief economic adviser Arvind Subramanian’s new research paper on India’s GDP figures, referring to parts of it as a “most unusual exercise”.
In a statement put out on Wednesday afternoon, the council, whose chairman is economist Bibek Debroy, has also noted that it would come out with a “point-to-point rebuttal” in due course.
On Tuesday, Subramanian’s new research made waves after it suggested that India’s GDP growth had likely been overstated by about 2.5 percentage points per year from 2011-2012 to 2016-17. The former chief economic adviser’s conclusion was that instead of the “reported growth of 6.9% between 2011 and 2016”, actual growth was more likely to have been “between 3.5% and 5.5%”.
The paper traces the problem to the changes in the way India calculated its GDP using the new 2011-12 baseline. In January 2015, the Central Statistics Office replaced the country’s GDP series (base year 2004-2005) with a new series that used 2011-2012 as a baseline.
The PMEAC has pointed out flaws in the manner in which Subramanian used “cross country regressions to estimate what India’s GDP should be”.
“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,” its statement noted.
“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.”
In his paper, Subramanian plotted out 17 key indicators that are “typically correlated with GDP growth” from 2001 to 2018. He found that while 16 out of 17 indicators positively correlated with India’s economic growth before 2011, after that, from 2011 onwards, 11 out of 17 indicators are negatively correlated with GDP.
The PMEAC has also appealed to India’s media and statistical community to not “sensationalise” the research findings put out by Subramanian.
“At the moment, it is felt 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, all of which the former CEA is familiar with,” the council, whose members include economists Shamika Ravi, Rathin Roy and Ashima Goyal, said.
“These are certainly issues that Dr 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.”