Rejecting Arvind Subramanian’s methodology, arguments and conclusions regarding the overestimation of gross domestic product (GDP) numbers, the Economic Advisory Council to the Prime Minister (EAC-PM) said, “Dr Subramanian has cherry-picked a few indicators and performed a rather unconvincing regression analysis to prove his hypothesis that India’s GDP was overestimated post-2011-12. ”.
The Economic Advisory Council to the Prime Minister (EAC-PM) on Wednesday released a detailed note titled ‘GDP estimation in India- Perspectives and Facts’, providing a clear rationale for India’s switch to an improved GDP estimation methodology in January 2015.
“The new methodology that uses 2011-12 as the base year includes two major improvements –incorporation of MCA21 database and 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 an average, real GDP estimates saw an increase of 0.7% among OECD countries,” an official release said.
The note also provides a point-to-point rebuttal to a recently published paper titled ‘India’s GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications’ by Arvind Subramanian.
The primary contributors to the note, namely Bibek Debroy, Rathin Roy, Surjit Bhalla, Charan Singh and Arvind Virmani, highlight 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.