SME Times News Bureau | 11 Jun, 2019
Chief Economic Advisor (CEA) Arvind Subramanian has questioning the change in India’s
GDP calculation methods and numbers effected last year.
recent research paper published by Harvard University, the former CEA has said
there is a possibility of substantial overestimation in the growth figures
while stating that the actual GDP growth between 2011-12 and 2016-17 was around
4.5 per cent as against 7 per cent.
"A variety of evidence suggests that the methodology changes introduced
for the post-2011 GDP estimates led to an over-estimation of GDP growth",
Subramanian has suggested that India's gross domestic product (GDP) growth
estimate has been overestimated by around 2.5 percentage points between 2011-12
and 2016-17, a period that covers the years during both the UPA and the NDA
Subramanian said: "This paper shows that India changed its data sources
and methodology for estimating real gross domestic product (GDP) for the period
since 2011-12. This change has led to a significant overestimation of
"Official estimates place annual average GDP growth between 2011-12 and
2016-17 at about 7 per cent. We estimate that actual growth may have been about
4.5 per cent with a 95 per cent confidence interval of 3.5 - 5.5 per cent,"
the research paper added.
The ex-CEA says there was "Proxying Informal by Formal Activity".
The informal sector accounts for 30 per cent of manufacturing gross value added
(GVA - excludes taxes) and hence about 5 per cent of overall GVA. According to
the paper, this proxy might be reasonable in normal times. But it likely
overestimated growth during a period when major policy actions -
"demonetization and GST" - disproportionately impacted the informal
Two important policy implications follow, says the ex-CEA, adding that the
entire national income accounts estimation should be revisited, harnessing new
opportunities created by the Goods and Services Tax (GST) to significantly
improve it, while restoring growth should be the urgent priority for the new
"India must restore the reputational damage suffered to data generation in
India across the board -- from GDP to employment to government accounts -- not
just by conferring statutory independence on the National Statistical Commission,
but also appointing people with stellar technical and personal
reputations," the paper said.
"At the same time, the entire methodology and implementation for GDP
estimation must be revisited by an independent task force, comprising both
national and international experts, with impeccable technical credentials and
demonstrable stature. And it must include not just statisticians but also
macro-economists and policy practitioners."
Asserting that the overestimation is not political in nature, Subramanian, who
was the CEA between 2014 and 2018, said this must be distinguished from recent
controversies over a back-casting exercise and "puzzling upward
revisions" for recent years.