As promised, the PM’s Economic Advisory Council (PMEAC) on Wednesday came out with a “point-to-point rebuttal” of Arvind Subramanian’s research paper that claimed India over-estimated its GDP growth figures post 2011-12.
The five-member PMEAC, chaired by Bibek Debroy, sought to highlight several flaws in the former chief economic advisor Subramanian’s research report.
Subramanian in his paper ‘India’s GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications’ had claimed that India overestimated the GDP growth rate by about 2.5 per cent per year between 2011-12 to 2016-17.
The PMEAC said that Subramanian used 17 indicators to express his skepticism about the growth rates post 2011-12, a majority of which have been taken directly from Center for Monitoring Indian Economy (CMIE), a private agency that is not a primary source of information, as it collects data from different sources.
The council also questioned Subramanian’s claim that the 17 indicators used are strongly co-related with GDP in the period from 2001-02 to 2016-17.
“He neither mentions the strength of correlation nor is it clear if there are other indicators that are more strongly co-related with GDP in either of the two periods he evaluates,” PMEAC said.
The council said that Subramanian’s paper is not peer-reviewed, and “in due course of time, many experts will weigh in on the dependability of techniques used, veracity and fullness of data used”.
The council said that the 17 indicators that Subramanian used, “overlooked tax data”.
“Unlike many indicators, tax data is not collected through surveys or by agencies through arcane techniques. These are hard numbers and should be an important indicator of growth, ” the council said.
Besides, the council said the author’s original hypothesis is the belief that 2004-05 series was perfect, and that all the calculation and estimation errors happened only post 2011.
“If everything was perfect before 2011, why did global experts encourage India to adopt a more robust GDP calculation methodology?, ” council asked.
The council also claimed that Subramanian made contradictory claims and drew mathematically incorrect conclusions.
“For instance, the paper claims that import growth and less export growth was 1.1% pre-2011 and -0.9% post-2011 and that “such staggering declines are simply incompatible with stable underlying GDP growth,” the council report added.
“Further, the author performs a cross-country regression when he compares India to the performance of 70 other countries. To put it simply, as per the author, if India doesn’t fall on the regression line for other countries, it must be doing something wrong,” the council said.
It cannot lead to the inference that India’s growth has been overestimated, simply because the drivers of its growth may have changed in the second period as per the author’s classification,” it added.
The council believed that Subramanian’s paper had an institutional bias against the Central Statistical Office (CSO).
In its concluding remark, the council said that “Arvind Subramanian seems to have made a hurried attempt to draw conclusions about India’s complex economy and its evolution.
Apart from Debroy, the primary contributions for the PMEAC report came from Rathin Roy, Surjit Bhalla, Charan Singh and Arvind Virmani.