India’ s growth was overstated during the six year period between 2011 and 2017 says former Chief Economic Advisor Arvind Subramanian.
In a six-year period spanning both the Congress-led UPA government and the BJP-led NDA government, India’s GDP was overstated by about 2.5 per cent suggested Subramanian in an article published by the Indian Express newspaper on Tuesday.
Referring to his research paper, published by the center for International Development at Harvard University, he says the average annual growth between 2011-12 and 2016-17 may have been about 4.5 per cent, instead of the projected 7 percent,
“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”, he says in the article.
“The Indian policy automobile has been navigated with a faulty, possibly broken, speedometer”, said the former CEA for Modi government between 2014 and 2018.
However, he maintained that the overestimation is not political. “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 suggested.
The overestimation occurred after the previous Congress-led government changed the methodology in calculating GDP in 2012. One of the key adjustments was a shift to financial accounts-based data compiled by the Ministry of Corporate Affairs, from volume-based data previously.
This made GDP estimates more sensitive to price changes, in a period of lower oil prices, as per the research paper. Rather than reduce input values by input prices, the new methodology reduced these values by output prices, which could have overstated manufacturing growth.
The latest study exposes doubt over India’s economic statistics. A growing number of critics have questioned India’s high growth estimates under Prime Minister Narendra Modi’s government.
“India must restore the reputational damage suffered to data generation in India across the board, from GDP to employment to government accounts,” Subramanian said, adding, “At the same time, the entire methodology and implementation for GDP estimation must be revisited by an independent task force.”
A delayed employment report was under controversy earlier this year for which two statistics officials quit after raising concerns about the data, and a group of 108 economists from around the world questioned whether politicians were trying to influence the figures.
The most recent data shows India’s growth slowed to a five-year low in the first three months of the year.