Now Panagariya criticizes Subramanian on GDP estimate

Former Niti Aayog Vice Chairman Arvind Panagariya, on Wednesday, joined the critics of former CEA Arvind Subramanian, whose research paper on India's GDP estimation created ripples in the political and news circles last week. Subramanian had said that India's economic growth between 2012 and 2017 was much below the official projection of 7%.

“Subramanian’s analysis is so problem-ridden, and its claim so far-fetched, that there are only two possible explanations for why he wrote it. One, he blundered — he simply did not realise the innumerable methodological problems afflicting his analysis."

“Two, he was aware of the shortcomings, but chose to ignore them in the hope of creating a sensation and gaining the attention of the government, media and, possibly, the whole world,” Panagariya said in a write-up in Economic Times on Wednesday.

He said if Subramanian were a young scholar, fresh out of graduate school, one could imagine that poor understanding of technical and methodological issues and eagerness to make a name led him to act in haste.

“But he is a seasoned economist. It is inconceivable that he was unaware of the numerous methodological shortcomings that are common knowledge among economists,” the former policy advisor, who too quit the Modi-led government midway his tenure," he said.

"If Subramanian had done the hard work of studying the 40-page document by the Central Statistical Office (CSO) describing in detail the methodology it deploys to estimate GDP, pinpointed the flaws in it, and explained how those flaws lead to overestimation of both GDP and its rate of growth, he would have done a great service to the country. Such constructive criticism would have also served him well. But by claiming that his growth estimate, derived from a cross-country regression with four explanatory variables, is superior, he has made a mockery of the painstaking work that CSO staff do day in and day out,” Panagariya said.

Panagariya was first among the policy advisors, who deserted the Modi-led government in his first term. His exit was criticised so much that the Prime Minister had to announce from a public forum that the ex-Niti Aayog vice chief was his friend and had come to serve India from Columbia on his request. He could not stay the full course due to personal problems.

Subramanian's paper

Subramanian, in his paper, published by the Center for International Development at Harvard University, said the GDP expansion was overestimated between 2011 and 2017. Rather than growing at about 7% a year in that period, growth was about 4.5%.

Prime Minister's Economic Advisory Council gave a point-by-point rebuttal to his claims but the Central Statistical Office, which is responsible for bringing out the data, has so far not spoken anything.

GDP data in the D/L method

Writing for the same daily, former World Bank and United Nations economist, Ajay Chibber, however, said, “On GDP data we are in a Duckworth Lewis-type situation. Nobody understands it, but has to grudgingly accept it – or perhaps ignore it, like most businesses are doing -- and use other indicators.”

The Duckworth–Lewis method is a mathematical formulation designed to calculate the target score for the team batting second in a limited overs match interrupted by weather or other circumstances. It is generally accepted to be the most accurate method of setting a target score. Also known as the D/L method, it was devised by two English statisticians, Frank Duckworth and Tony Lewis.