EAC chairman refutes former CEA's claim on GDP estimates
12 June 2019
The Economic Advisory Council to the Prime Minister (EAC-PM) has refuted the claims of former Chief Economic Advisor (CEA) Arvind Subramanian that suggested overestimation of GDP numbers in India and said it will come out with a point-by-point rebuttal in due course.
The former CEA recently published a paper `India’s GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications’. He followed this up by publishing an article in Indian media, making strong claims that India’s real GDP figures between 2011-12 and 2016-17 were overestimated.
The EAC has pointed out that the base year of India’s income calculations shifted to 2011-12 on the basis of recommendations of several committees with experts in National Income Accounting. It was on the basis of these recommendations, started in 2008, that the government implemented the change from January 2015. Therefore, it is wrong to suggest that the views of experts have not been taken into account while changing the base year or weights for switching from Annual Survey of Industries (ASI) to ministry of corporate affairs (MCA) 21, says the EAC.
“In his paper, Subramanian has 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. Nor does this exercise allow for GDP increases on the basis of productivity gains,” the ECA noted.
A country’s GDP is in nominal terms and any exercise should be on the basis of nominal figures, not real growth rates, it added.
The EAC said it would examine in detail the estimates made in Arvind Subramanian’s paper and come out with a point-to-point rebuttal in due course.
At the moment, however, the EAC said 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.
“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,” the EAC added.