GDP Growth Overestimated During 2011-17: Arvind Subramanian

Actual growth only 4.5%, says ex-Chief Economic Adviser

- TCA Sharad Raghavan

Former Chief Economic Adviser (CEA) Arvind Subramanian has said India’s GDP growth in the period 2011-12 to 2016-17 is likely to have been over-estimated, and the tag of the fastest-growing major economy may not hold.

In a research paper, ‘India’s GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications’, published by Harvard University, Mr. Subramanian has argued that GDP growth during that period was actually 4.5% rather than the 7% presented by official data.

“Official estimates place annual average GDP growth between 2011-12 and 2016-17 at 7%. We estimate that actual growth may have been about 4.5%, with a 95% confidence interval of 3.5-5.5%.”

Mr. Subramanian, whose term as CEA from October 2014 to June 2018 coincided in part with this period of “overestimation”, has stressed that his paper deals with the technical origins of the overestimation and not the political aspects.

Responding to Mr. Subramanian's paper, the Ministry of Statistics and Programme Implementation late on Tuesday reiterated its stance that the methodology adopted was in line with international standards as set by the United Nations and was as such robust.

One of the problems highlighted by the former CEA was that growth numbers no longer correlated with other indicators of economic growth such as electricity consumption, two-wheeler sales, airline passenger traffic, index of industrial production, and export figures, to name a few.

In total, Mr. Subramanian looked at 17 such indicators and found that “the correlations between most indicators and GDP growth broke down in the post-2011 period”.

Methodological issues