Days after former chief economic advisor (CEA) Arvind Subramanian raised questions about India’s GDP data from 2011 to 2017, the Prime Minister's Economic Advisory Council (PMEAC) has hit back.
Subramanian had claimed that India’s GDP from 2011 to 2017 could be overestimated by 2.5 percent every year. The PMEAC has released a 12-page report which it calls as a 'point-by-point rebuttal' of the claims made by the former CEA.
As per the report, “a critique of official GDP estimates must specifically critique coverage or methodology, the author does neither." The report claims that Subramanian 'cherry-picked' high frequency indicators and 'overlooked' tax collections.
“The weakness of Dr. Subramanian’s attempt to suggest that the growth numbers are overestimated confirms that the estimation process is robust to spurious criticism,” the report said. It also said Subramanian's paper is "not peer-reviewed and won't stand academic scrutiny".
To discuss the point-by-point rebuttal of PMEAC, CNBC-TV18 spoke to Jaimini Bhagwati, RBI Chair Professor at Indian Council for Research on International Economic Relations, and Rathin Roy, Member of PMEAC.
According to Bhagwati, Subramanian’s rush to the media to publish his opinion is quite premature. “There is a little bit of background to this whole issue. You might recall that there was some brouhaha when two members of the National Statistical Commission (NSC) resigned saying they were not consulted before the Niti Aayog put out the numbers on unemployment. Then some people have been uncomfortable with the way GDP has been calculated ever since the new series has come out.”
Bhagwati pointed out that he had no access to raw data. "But my own sense is that Subramanian took 17 high frequency indicators and came up with certain numbers on growth. I am a little uncomfortable particularly with the dramatic drop. On the other hand, if you look at two-wheeler sales, you look at car sales, you look at exports, they are not doing too well to say the least; but does it necessarily mean that GDP growth is at 4.5 percent? I do not think so. You look at the NBFC crisis, there is no lending in the money markets and the RBI is standing ready to provide liquidity,” he observed.
A growth rate of 4.5 percent is too low given everything that’s happening, Bhagwati noted. “It is highly premature for anyone to comment. The PMEAC is a body with a number of experts who won't say something without having looked at what Subramanian has said and written very carefully,” he said.
“Subramanian was till recently the CEA. I would have thought that as a courtesy to his former colleagues, he would have shared his findings confidentially with those whom he knew well in the Ministry of Finance. Once they fail to satisfy him, he should go public because there is an impact on investors,” Bhagwati added.
Member of PMEAC Rathin Roy has said one does not measure GDP using indicators. “The first thing you learn in under-graduate economics is that correlation does not imply causation. One measures GDP by using a gross value added-based approach and then cross checks those measures with indicators. You do not use indicators to measure GDP,” he said.