Frontline – July 05, 2019

THE ECONOMY

IN no branch of knowledgedo
academics enjoyas muchclout as in
thedisciplineof economics.And,
economists whoare in closeproxim-
ity to powerenjoynotjustcloutbut
also impunity from consequences
thattheyunleashon millionsof un-
suspectingsouls.Whentheformer
ChiefEconomicAdviser(CEA)to the
Government, ArvindSubramanian,
recently published a quasi-academic
paperchallengingthe officialestim-
ates of India’s gross domestic
product (GDP)andpegging growth
rates at significantly lower levels
thantheofficialfigures,it would
havestumpedmostIndians.Howis
it thatthe samepersonwhooughtto
havehada commandingviewof the
Indianeconomywhilein officeuntil
lastyear(ArvindSubramanianwas
CEAfromOctober 2014 to June
2018),butdidlittleto questionthe
estimatesof national output and
growth, nowauthorsa paper from
the safedistanceof Harvard?
Subramanian’s paper, “India’s
GDP Mis-estimation: Likelihood,
Magnitudes, Mechanisms, andIm-
plications”,publishedas a working
paperby the Centre for International
Development at HarvardUniversity,
claimedthattheIndianeconomy
grewat only4.5 percent—not7 per
cent as officially estimated—
between 2011-12and2016-17.To a
governmentthathasalreadybeen
bearingthe brunt of criticismof the

obfuscationof officialstatisticson

multiplefronts,thiswasa big blow,

comingas it did fromthe sameman

who,untilthe other day,appearedto

sit comfortably with those very

statistics.

Subramaniangavea boostto his

claimsby simultaneously writingan

articleon the samedayin an English

dailyin India,clearly aiming to max-

imisetheimpactof whathe con-

sideredto be explosiveclaims. He

claimed that methodological

changes effectedin the newseriesof

GDP(base2011-12) thatwasintro-

ducedin 2015aftertheNarendra

Modigovernmentassumed officefor

itsfirst termoverstatedthevalue of

thenationaloutput. To be fair,the

changesin the methodology were

initiatedby the previous government

headedby ManmohanSinghwellbe-

forePrimeMinisterNarendraModi

assumedofficein 2014.

Thegovernment reactedquickly.

Thesameevening,on June11, the

Ministry of Statistics and Pro-

gramme Implementation refuted

Subramanian’sclaimandasserted

thatits methodologywasnotonly

rightbut alsocompliedwithinterna-

tionalnormson nationalaccounts

statistics. TheEconomicAdvisory

Council(EAC)to the PrimeMinister

urgedan “academicdebate” instead

of anyattemptto “sensationalise”the

issue.It alsopromiseda detailedre-

buttalto Subramanian in duecourse.

Cruciallymissingin bothdefences

wereanyreferenceto the controver-

sialnatureof the datasource,whose

examinationis alsoa glaringomis-

sionin Subramanian’sexercise.

Two importantaspects of the

changein the baseperiodfor estim-

atingGDPandgrowthinitiatedin

thelastrevision appearto haveig-

nitedthenever-endingcontroversy

overtheestimateseversincethey

wereannouncedfirst in 2015. The

first was a fundamental shift in

methodology—a changeover that

emphasisesthevalueof outputin-

steadof the quantityof output as was

doneearlier.Severaleconomists and

ADNAN

ABIDI/REUTERS

ARVINDSUBRAMANIAN,

formerChiefEconomicAdviser.

Growth story

in shreds

A formersenioradvisertothegovernmenton economicmatters

deliversanotherblowtothecredibilityofIndia’sgrowthrate,butthe

methodologyofhisstudyis seriouslyflawed.BYV.SRIDHAR