PM advisory body’s caustic rebuttal on GDP rate row, says more coming

The Prime Minister’s Economic Advisory Council on Wednesday waded into the row over India’s real growth rate with a sharp rebuttal to the government’s former adviser who has suggested that the country may have overestimated the Gross Domestic Product numbers.

The rebuttal from the PM’s advisory group is the second that Arvind Subramanian’s estimate has attracted in two days. A statement issued by the advisory group promised there will be another, a much longer one that will list out point-to-point contradiction.

Yesterday, the statistics ministry had insisted that the country measured the contribution of various sectors in the economy objectively and the country’s gross domestic product (GDP) estimates are based on accepted procedures and methodologies.

In an academic paper published by the Center for International Development at Harvard University followed up by a newspaper article, former chief economic adviser Arvind Subramanian had concluded that the government may have over-estimated the growth rate by around 2.5 percentage points between 2011-12 and 2016-17 due to a change in methodology to calculate GDP. This implied that India grew by about 4.5 per cent instead of the official estimate of close to 7 per cent.

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Arvind Subramanian had been known to speak his mind even when he was the finance minister’s chief adviser between 2014 and 2018, occasionally leading to some embarrassing moments in the government.

The economic advisory council contested Arvind Subramanian on the point that it hadn’t taken views of experts when it changed the base year and weights. It also faulted his methodology, insisting that he had used cross-country regressions to estimate what India’s GDP should be. This, the PM’s group said, was the “most unusual exercise” as was the suggestion that any country’s GDP which was off the regression line must be question.

“The proxy indicators that he used can also be questioned. Nor does this exercise allow for GDP increases on the basis of productivity gains. A country’s GDP is in nominal terms and any exercise should be on the basis of nominal figures, not real growth rates,” the statement said.

“At the moment, it is felt that any attempt to sensationalize 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,” it said.

“These are certainly issues that Dr. 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-PM added.