India’s former chief economic adviser has concluded that the country’s economic growth rate was significantly overestimated between 2011 and 2017, adding to concerns that official statistics have masked a sharp slowdown in the economy.
Arvind Subramanian, a veteran economist who advised the Indian government from 2014 to 2018, said that the country’s average annual growth in gross domestic product between 2011 and 2017 was in fact around 4.5 per cent, against official estimates of 7 per cent. His findings were presented in a research paper published by the Center for International Development at Harvard University’s Kennedy School, which found that the correlations between 17 independent indicators of economic activity and GDP broke down after 2011, leaving India an outlier compared to other countries’ economic data.
“The heady narrative of a guns-blazing India — that statisticians led us to believe — may have to cede to a more realistic one of an economy growing solidly but not spectacularly,” Mr Subramanian said, writing in the Indian Express newspaper, adding that the data may provide an answer to the country’s recent puzzle of “jobless growth”.
Mr Subramanian said the errors were the result of technocratic methodological changes under both the previous Congress-led administration and the ruling Bharatiya Janata Party, clarifying that he viewed the issue as separate from more recent controversies over the politicisation of India’s GDP data under Prime Minister Narendra Modi. Still, the findings will add to growing doubts over the reliability of the country’s official statistics, coming a month after a government agency took the unusual step of highlighting multiple gaps in a database used to calculate GDP figures.
Mr Subramanian emphasised that the policy implications of the errors could have been substantial, saying “the Indian policy automobile has been navigated with a faulty, possibly broken, speedometer”. He pointed to interest rates that may have been set as much as 150bp too high, and action on agricultural and banking sector distress that may have been too slow as possible results of the inaccurate data.
Pre-empting questions over his tenure as chief economic adviser during the period in question, Mr Subramanian said his team “raised these doubts frequently within government, and publicly articulated these in a measured manner in government documents”, but that his time outside government had been necessary to gather robust evidence of the flaws.
source : https://www.ft.com/content/b452f684-8c01-11e9-a1c1-51bf8f989972
Arvind Subramanian, a veteran economist who advised the Indian government from 2014 to 2018, said that the country’s average annual growth in gross domestic product between 2011 and 2017 was in fact around 4.5 per cent, against official estimates of 7 per cent. His findings were presented in a research paper published by the Center for International Development at Harvard University’s Kennedy School, which found that the correlations between 17 independent indicators of economic activity and GDP broke down after 2011, leaving India an outlier compared to other countries’ economic data.
“The heady narrative of a guns-blazing India — that statisticians led us to believe — may have to cede to a more realistic one of an economy growing solidly but not spectacularly,” Mr Subramanian said, writing in the Indian Express newspaper, adding that the data may provide an answer to the country’s recent puzzle of “jobless growth”.
Mr Subramanian said the errors were the result of technocratic methodological changes under both the previous Congress-led administration and the ruling Bharatiya Janata Party, clarifying that he viewed the issue as separate from more recent controversies over the politicisation of India’s GDP data under Prime Minister Narendra Modi. Still, the findings will add to growing doubts over the reliability of the country’s official statistics, coming a month after a government agency took the unusual step of highlighting multiple gaps in a database used to calculate GDP figures.
Mr Subramanian emphasised that the policy implications of the errors could have been substantial, saying “the Indian policy automobile has been navigated with a faulty, possibly broken, speedometer”. He pointed to interest rates that may have been set as much as 150bp too high, and action on agricultural and banking sector distress that may have been too slow as possible results of the inaccurate data.
Pre-empting questions over his tenure as chief economic adviser during the period in question, Mr Subramanian said his team “raised these doubts frequently within government, and publicly articulated these in a measured manner in government documents”, but that his time outside government had been necessary to gather robust evidence of the flaws.
source : https://www.ft.com/content/b452f684-8c01-11e9-a1c1-51bf8f989972
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