Why questions are being raised over GDP numbers

  • Former chief economic adviser Arvind Subramanian has claimed that India’s GDP numbers between 2011-12 and 2016-17 may have been overestimated
  • Mint delves into the latest controversy, which casts fresh doubts over the country’s economic data

Arvind Subramanian, former chief economic adviser (CEA) to the finance ministry, has claimed that India’s gross domestic product (GDP) numbers between 2011-12 and 2016-17 may have been overestimated. Mint delves into the latest controversy, which casts fresh doubts over the country’s economic data.

What did the former CEA say?

The former CEA said growth as measured by GDP growth rate was overestimated by 2.5 percentage points for each year between 2011-12 and 2016-17. The period spans the rule of both the UPA and NDA governments. Subramanian wrote this in a 33-page research paper published at Harvard University, saying that part of the overestimation could be related to a key methodological change that affected the measurement of the formal manufacturing sector. But for the changes, as he pointed out, actual growth during this period is likely to have been around 4.5% and not the 6.9% average, according to official estimates.

A file photo of Arvind Subramanian, former chief economic adviser (CEA) to the finance ministry
A file photo of Arvind Subramanian, former chief economic adviser (CEA) to the finance ministry

How did he justify not speaking up earlier?

Subramanian was the CEA from October 2014 to June 2018 and thus had the authority to question the numbers. He said these doubts were raised and articulated within the finance ministry, but he needed the time away from his job to do the research necessary to challenge the official numbers. He said the overestimation of figures had nothing to do with politics and the methodological changes were a result of substantive work done by technocrats, largely in the UPA government, lest it was misconstrued as another instance of an economist educated abroad speaking against a nationalist government.

What has been the govt’s response?

The government’s response has so far been measured, even as it said that it would issue a point-by-point rebuttal of Subramanian’s claims. It has said that data requirements are immense and diverse economies such as India take time to evolve relevant data sources before they can be fully aligned with the UN-adopted System of National Accounts that it adheres to. The government said a comparison of the old and new data series is not amenable to simplistic models. It pointed out that GDP growth projections by various national and international agencies are broadly in line with the statistics ministry’s estimates.

Is this controversy different from those about government data?

Subramanian’s paper does not address questions that have been at the heart of controversies in the last year or so. Those related to back-casting, upward revisions in GDP and the MCA database that a 10 May Mint article questioned. Those incidents were more about government interference in data dissemination and the data being faulty or wrongly classified.

Are the findings a cause for concern?

Subramanian’s call to revisit GDP numbers is a serious one. He hasn’t blamed any government nor hinted at there being any political overtones to the overestimation. His paper says that “the narrative of a guns-blazing India may have to cede to a more realistic one of an economy growing solidly but not spectacularly". It makes a case for a relook into all the numbers so that the government can have a considered view of the economy and take remedial steps.

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