New Delhi: Former Chief Economic Adviser (CEA) to the government Arvind Subramanian has claimed that the rosy picture of India’s growth statistics painted in the aftermath of the 2008 meltdown was actually far more modest than what it was made out to be. In his latest research paper, Subramanian said that India’s DP growth between 2011-12 and 2016-17 was probably overestimated by about 2.5 percent by the then UPA-II regime and later by the BJP.
Actual growth between 2011 & 2016 could have been 3.5%
He has contended that instead of the 6.9 percent growth that was reported between 2011 and 2016, the actual growth was more likely to have been between 3.5 percent and 5.5 percent. “A variety of evidence—within India and across countries—suggests that India’s GDP growth has been over-stated by about 2.5 percentage points per year in the post-2011 period, with a 95 per cent confidence band of 1 percentage point,” the research paper said.
“The Indian policy automobile has been navigated with a faulty, possibly broken, speedometer,” Subramanian wrote.
‘Overestimation not political’
“My research suggests that post-global financial crisis, 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,” Subramanian wrote in a column in The Indian Express.
“The work was done by technocrats, and largely under the UPA-2 government,” he said. The UPA regime had revised the methodology to calculate GDP in 2012. Subramanian also added that the effort was desirable, both to expand the data for GDP estimation and to move to a methodology more suited for a technologically advancing, dynamic economy.
‘There was no jobless growth’
While debunking the idea of a ‘jobless growth,’ Subramanian said, “In reality, weak job growth and acute financial sector stress may have simply stemmed from modest GDP growth. Going forward, there must be reform urgency stemming from the new knowledge that growth has been tepid, not torrid; And from recognising that growth of 4.5 percent will make the government’s laudable inclusion agenda difficult to sustain fiscally.”
‘Inaccurate statistics dampened reform’
While noting that “inaccurate statistics” dampened the impetus for reform, the former CEA said that had the actual growth numbers been known, the urgency to act on the banking system or on agricultural challenges would have been greater.
Subramanian said that the issue highlighted in his research paper should be looked at as separate from the recent controversies on back-casting exercise and “puzzling upward revisions” for recent years.