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EAC plays offense, debunks Subramanian’s GDP report

The Council said that the former CEA’s analysis ignores data on services and agriculture and shows blind trust in a private firm CMIE
New Delhi: The Economic Advisory Council to the Prime Minister (EAC-PM) issued a detailed statement rejecting former Chief Economic Adviser Arvind Subramanian’s claim that India’s Gross Domestic Product (GDP) had been bumped up by at least 2.5 percent since 2011. The Council said that his analysis ignores data on services and agriculture and shows blind trust in a private firm CMIE.

EAC plays offense

A paper released by EAC-PM asserted that India’s GDP estimation methodology stands at par with its global standing as a major and responsible economy. Primary contributors to the paper included economists Bibek Debroy, Rathin Roy, Surjit Bhalla, Charan Singh, Arvind Virmani.

‘Hurried attempt to draw conclusions’

While noting that Subramanian seems to have made a “hurried attempt to draw conclusions” about India’s complex economy and its evolution, the EAC said in the paper that he has used 17 high-frequency indicators, but ignores the representation of ‘services sector’ (60 percent in GDP) and ‘agriculture sector’ (18 percent of GDP) in the analysis.

‘Erroneous foundation’

The paper claims that the 17 indicators on which Subramanian bases his paper have been taken directly from the Centre for Monitoring Indian Economy (CMIE), a private agency that is not a primary source of information but collects it from different sources. “For anyone who reads Dr Subramanian's paper, it is evident that he trusts CMIE but distrusts CSO (Central Statistics Office)... This blind trust in a private agency (CMIE) and blind distrust in a government institution that has served India (CSO) appears unwarranted for a neutral academic,” it said. The paper added that Subramanian has overlooked the tax data.

The backdrop

The statement comes a few weeks after Subramanian released a paper titled ‘India’s GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications.’ The paper, which was published at Harvard University, also came at a time when concerns were raised from various quarters on the veracity of India’s official growth figures.