Economic Advisory Council too trashes former CEA's claims on growth

NEW DELHI: The Economic Advisory Council to the Prime Minister has refuted former chief economic advisor Arvind Subramanian’s claim that India’s GDP growth was overestimated between 2011-12 and 2016-17, saying the base year of income calculations was shifted to 2011-12 in line with the recommendations of several committees.

The EAC, headed by economist Bibek Debroy, said it will examine in detail the estimates made in Subramanian’s paper and come out with a point-by-point rebuttal.

Subramanian said India’s actual GDP growth in the period was about 4.5% with a 95% confidence interval of 3.5-5.5% as against reported growth of almost 7%.

“It is worth noting 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,” the EAC said in a statement on Wednesday.

The Ministry of Statistics and Programme Implementation had issued a detailed statement on Tuesday refuting Subramanian’s paper and saying that the country follows accepted international practices for measuring the performance of the economy.

“The GDP estimates released by the ministry are based on accepted procedures, methodologies and available data and objectively measure the contribution of various sectors in the economy,” the ministry said.

“It is wrong to suggest that the views of experts have not been taken into account while changing the base year or weights or switching from Annual Survey of Industries to Ministry of Corporate Affairs (MCA) 21,” the EAC said.

On the use of cross-country regression by Subramanian in his paper, the EAC said it 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 EAC said.

“At the moment, it is felt that 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,” it said.

According to the council, a country’s GDP is in nominal terms and any exercise should be based on nominal figures, not real growth rates.

“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 added.

Chandrajit Banerjee, Director General of the Confederation of Indian Industry, said, “the Indian economy is a complex one and cannot be captured by just a few indicators.”

He referred to Subramanian’s method of taking only some high-frequency data to build his argument and said the growth estimates by the ex-CEA omit productivity and quality and take into account only volume. “GDP data has to take a more robust and comprehensive approach,” he said.