Arvind Subramanian’s methodology, arguments and conclusions regarding overestimation of gross domestic product (GDP) numbers, the Economic Advisory Council to the Prime Minister (EAC-PM) said the former chief economic advisor (CEA) has cherry-picked a few indicators to prove his hypothesis that India’s GDP was over-estimated post-2011-12.
In its detailed note released on Wednesday titled ‘GDP estimation in India- Perspectives and Facts,' the EAC-PM said the note highlighted the absurdity in Subramanian’s paper that selectively ignores tax data based on the argument that the period post-2011-12 witnessed “major changes in direct and indirect taxes”.
In a research paper, Subramanian, who stepped down last year, has said India's economic growth rate has been overestimated by around 2.5 percentage points between 2011-12 and 2016-17 due to a change in methodology for calculating GDP.
In its statement, the EAC-PM mentioned that there is a clear rationale for India’s switch to an improved GDP estimation methodology in January 2015 as it uses 2011-12 as the base year which includes two major improvements, a) Incorporation of MCA21 database, and b) Incorporation of the Recommendations of System of National Accounts (SNA), 2008.
"This change was in line with other countries that have changed their methodologies in line with SNA 2008 and revised their respective GDP figures. On average, real GDP estimates saw an increase of 0.7 percent among OECD countries," it said.
The primary contributors to the note, namely Bibek Debroy, Rathin Roy, Surjit Bhalla, Charan Singh and Arvind Virmani, highlights eight clear points with supportive facts and arguments that debunk Subramanian’s paper in entirety as former CEA's analysis ends on March 31, 2017, while the only major tax change (GST) was introduced on July 1, 2017.
However, the note concludes with the point that India’s GDP estimation methodology is by no means a perfect exercise and the ministry of statistics and program implementation is working on multiple aspects to improve the accuracy of economic data.
"Going forward, Indian National Income Accounting is bound to change for good and an important step in accomplishing that will involve criticism from experts and academics. But the country’s interests are not served by imparting sensationalism through the negativity that questions the credibility of the system," it added.Last week, the government refuted the claims of Subramanian and said it will come out with a point-by-point rebuttal in due course. The Economic Advisory Council will examine in detail the estimates made in Subramanian’s paper and come out with a point-by-point rebuttal in due course, it said in a statement.