Come clean on GDP

GDP

Did both UPA and NDA governments overstate GDP growth figures for six years during 2011-17? If so, did both the Manmohan Singh and Narendra Modi governments knowingly misrepresent the state of the economy? These are the questions that arise out of a startling research paper put out by former chief economic adviser Arvind Subramanian. As per his latest research, India’s growth was nothing spectacular in this time. GDP grew at a modest 4.5%, a full 2.5% lower than the 7% aggregate growth reported by the government. The research punctures the famed India growth story sold globally for years. Though Subramanian fleetingly admits that his research may not be the final word, he points to evidence that’s at his command to demolish claims of India being the fastest growing economy surpassing even China. Subramanian also points to innumerable “anomalies and puzzles” in statistics and data leading to over-estimation of real GDP figures, especially after the basic computation matrix was redone during the UPA regime.

The change from volume to value-based statistical analysis, especially for industrial production, for estimation of GDP has come under scrutiny. Though Subramanian does not find fault with value-based GDP growth figures per se, he points to problems with the integrity of the underlying data. Subramanian argues that jobless growth, the stress in rural and farm sectors and the financial and industrial sectors are possibly real given the overstated GDP figures. If his findings were taken at face value, then macro-economic ratios like GDP-to-fiscal deficit, GDP-to-debt need to be revisited. The government’s accounts may have to be restated. Questions like whether price deflators were properly applied when global crude prices touched rock-bottom have popped up. If real GDP figures have gone awry, then does that mean nominal GDP figures were also wrong? Has Gross Value Addition (GVA) measured on consumption and investment activity also been misrepresented?

These are questions that the government of the day has to answer. Quality and integrity of statistical data must be of the highest order and should not inflict reputational damage to the country’s international standing. While providing statutory independence to the National Statistical Commission was important, the government will have to come clean on growth figures. On the other hand, why is it that technocrats and economists like Arvind Subramanian go public only after laying down office is the moot question. As chief economic adviser for nearly four years, Subramanian should have initiated course correction if data integrity was under question. Nonetheless, Subramanian’s research should serve as an input for the government to set its house in order.

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