- Former Chief Economic Adviser Arvind Subramanian speaks about GDP growth
- Says GDP data may have been overestimated during UPA-2 and NDA-1
- He however asserts that the overestimation is not political
India's growth in a six-year period spanning both the Congress-led UPA government and the BJP-led NDA government was overstated by about 2.5 per cent, former Chief Economic Adviser Arvind Subramanian suggests in an article published by the Indian Express newspaper on Tuesday. The average annual growth between 2011-12 and 2016-17 may have been about 4.5 per cent, not seven per cent, he says, referring to his research paper.
"The Indian policy automobile has been navigated with a faulty, possibly broken, speedometer," says Arvind Subramanian, who was Chief Economic Adviser for Prime Minister Narendra Modi's government between 2014 and 2018. He asserts that the overestimation is not political.
"My new research suggests that post-global financial crisis, the heady narrative of a guns-blazing India - that statisticians led us to believe - may have to cede to a more realistic one of an economy growing solidly but not spectacularly," he writes in the Indian Express piece, attributing the overestimation to "methodological changes".
Dr Subramanian clarifies that the changes, which did not originate from politicians, must be distinguished from recent controversies over a back-casting exercise and "puzzling upward revisions" for recent years.
"The substantive work was done by technocrats, and largely under the UPA-2 government," he says. The effort was desirable, both to expand the data for GDP (Gross Domestic Product) estimation and to move to a methodology more suited for a technologically advancing, dynamic economy, according to him.
"The non-politicised nature of the changes can be seen from the fact that the new estimates bumped up growth for 2013-14, the last year of the UPA-2 government."
He says one sector where the "mis-measurement" seems particularly severe is formal manufacturing. Before 2011, formal manufacturing value added from the national income accounts moved closely with IIP (Index of Industrial Production) and with manufacturing exports. "But afterward the correlations turn strongly and bizarrely negative," he notes.
He says "inaccurate statistics" on the economy's health dampen the impetus for reform. Had it been known that India's GDP growth was actually 4.5 per cent, the urgency to act on the banking system or on agricultural challenges may have been greater, he explains.
He suggests that GDP estimation be revisited by an independent task force comprising national and international experts, statisticians, macro-economists and policy users.
According to the former top economic adviser, the popular narrative has been one of "jobless growth", hinting at a disconnect between fundamental dynamism and key outcomes. "In reality, weak job growth and acute financial sector stress may have simply stemmed from modest GDP growth. Going forward, there must be reform urgency stemming from the new knowledge that growth has been tepid, not torrid; And from recognising that growth of 4.5 per cent will make the government's laudable inclusion agenda difficult to sustain fiscally."
Dr Subramanian explains that when he was working with the government, he had grappled with conflicting data and "raised doubts frequently" with the government. "But the time and space afforded by being outside government were necessary to undertake months of very detailed research, including subjecting it to careful scrutiny and cross-checking by numerous colleagues, to generate robust evidence," he says.