Skip to main content

Subramanian used "simplistic" model to assume Govt of India overestimated GDP

Counterview Desk
Even is refusing to reply point by point issues raised by Dr Arvind Subramanian, former chief economic adviser, Government of India (GoI), regarding how GoI has been ever since 2011  overestimating India’s GDP growth by a whopping 2.5%, the Ministry of Statistics and Programme Implementation (MOSPI) has asserted that the methodology followed by him based on indicators like electricity consumption, two-wheeler sales, commercial vehicle sales, etc. and using an econometric model to arrive at the conclusion is “simplistic.”
In a statement issued through the Press Information Bureau, the Ministry claims, its data is based on “global standardization” arrived by on the basis of consultations with UN’s statistical commission, and is broadly in line with the methodology followed by the International Monetary Fund and the World Bank. It adds, Ministry’s methodology has been reached following consensus reached by several government agencies and the Advisory Committee on National Accounts Statistics (ACNAS) comprising experts from academia.

Text of the statement:

Reports have appeared in a section of media citing Dr Arvind Subramanian as regards overestimation of India’s GDP growth, primarily based on an analysis of indicators, like electricity consumption, two-wheeler sales, commercial vehicle sales etc., using an econometric model and associated assumptions. The Ministry of Statistics and Programme Implementation has released details from time to time to explain the complexities involved in GDP compilation.
The estimation of GDP in any economy is a complex exercise where several measures and metrics are evolved to better measure the performance of the economy. For the purpose of global standardization and comparability, countries follow the System of National Accounts (SNA) evolved in the UN after elaborate consultation.
The System of National Accounts 2008 (2008 SNA) is the latest version of the international statistical standard for the national accounts, adopted by the United Nations Statistical Commission (UNSC) in 2009 and is an update of the earlier 1993 SNA. The Inter-Secretariat Working Group on National Accounts (ISWGNA) was mandated to develop the 2008 SNA through intense discussions and consultation with member countries.
India also participated in the deliberations of the Advisory Expert Group. In its adoption of the 2008 SNA the UNSC encouraged Member States, regional and sub-regional organizations to implement its recommendations and use it for the national and international reporting of national accounts statistics based on the available data sources.
As with any international standard, the data requirements are immense and diverse economies like India take time to evolve the relevant data sources before they can be fully aligned with the SNA requirements. In absence of data, alternate proxy sources or statistical surveys are used to estimate the contribution of various sectors to the GDP/GVA. The SNA also prescribes that the base year of the estimates may be revised at periodic intervals so that changes in the economic environment, advances in methodological research and the needs of users are appropriately captured.
With structural changes taking place in the economy, it is necessary to revise the base year of macroeconomic indicators like Gross Domestic Product (GDP), Index of Industrial Production (IIP), Consumer Price Index (CPI) etc., periodically to ensure that indicators remain relevant and reflect the structural changes more realistically. Such revisions not only use latest data from censuses and surveys, they also incorporate information from administrative data that have become more robust over time.
In India, the Base Year of the GDP Series was revised from 2004-05 to 2011-12 and released on January 30, 2015 after adaptation of the sources and methods in line with the SNA 2008. The methodology of compilation of macro aggregates has been discussed in detail by the Advisory Committee on National Accounts Statistics (ACNAS) comprising experts from academia, National Statistical Commission, Indian Statistical Institute (ISI), Reserve Bank of India (RBI), Ministries of Finance, Corporate Affairs, Agriculture, NITI Aayog and selected State Governments.
It may be noted that decisions taken by these Committees are unanimous and collective after taking into consideration the data availability and methodological aspects before recommending the most appropriate approach.
In addition, India has subscribed to the Special Data Dissemination Standard (SDDS) of the International Monetary Fund (IMF) and an Advance Release Calendar is decided for release of estimates. The IMF had raised certain issues on the usage of double deflation in the Indian GDP series and India had informed IMF that the existing data availability does not permit its application in India at present.
In fact, some media reports, while citing the changes in GDP growth likely to result from adopting the double deflation, acknowledge the varying outcomes obtained by different authors under their own distinct assumptions. In view of these divergent views, the Advisory Committee on National Accounts Statistics (ACNAS) had not agreed to adoption of double deflation at this stage. Moreover, double deflation is used in only a few countries that have a Producers Price Index (PPI) to deflate the inputs.
According to the World Bank, the accuracy of national accounts estimates and their comparability across countries depend on timely revisions to data on GDP and its components. The frequency of revisions to GDP data across countries varies between monthly, quarterly, annually or even less frequently. The International Monetary Fund (IMF), through its technical missions also reviews the implementation of recommendations of SNA and provides necessary technical support.
Further, under Article IV of IMF, a Mission, interacts annually with officials of Ministry of Statistics and Program Implementation, Reserve Bank of India and Ministry of Finance on issues relating to economic development and policies. The detailed methodology for compilation of the GDP, including the Back Series is available on the website of the Ministry. It may also be noted that the National Accounts Division, which compiles these macro aggregates and other National Accounts Statistics is also ISO (International Organisation for Standards) 9001:2015 certified for its quality management of procedures and processes.
With any Base Revision, as new and more regular data sources become available, it is important to note that a comparison of the old and new series are not amenable to simplistic macro-econometric modelling. It may also be seen that the GDP growth projections brought out by various national and international agencies are broadly in line with the estimates released by MOSPI. The GDP estimates released by the Ministry are based on accepted procedures, methodologies and available data and objectively measure the contribution of various sectors in the economy.

Comments

TRENDING

Bharat Ratna nominee ‘joined hands’ with British masters to 'crush' Quit India

By Shamsul Islam*
The Quit India Movement (QIM), also known as ‘August Kranti' (August Revolution), was a nation-wide Civil Disobedience Movement for which a call was given on August 7, 1942 by the Bombay session of the All-India Congress Committee. It was to begin on August 9 as per Gandhi's call to 'Do or Die' in his Quit India speech delivered in Bombay at the Gowalia Tank Maidan on August 8. Since then August 9 is celebrated as August Kranti Divas.

132 Gujarat citizens, including IIM-A faculty, others declare solidarity with Kashmiris

Counterview Desk
A week after it was floated, 132 activists, academics, students, artists and other concerned citizens of Gujarat, backed by 118 living in different parts of India and the world, have signed a "solidarity letter" supporting the people of Jammu and Kashmir (J&K), who, it claims, have been silenced and held captive in their own land. The signatories include faculty members and scholars of the prestigious Indian Institute of Management-Ahmedabad (IIM-A).

Plebiscite in J&K? Delhi meet demands implementation of UN 'commitment'

Counterview Desk
A citizens’ protest, organised on October 19 at Jantar Mantar, New Delhi, to protest against the 75 days of “oppression” of the people of Jammu and Kashmir (J&K) saw over 200 activists, academics, intellectuals, prominent citizens, students, citizens from a large number of groups controversially appeared to suggest holding plebiscite in order to decide the future of the state.

Gujarat's incomplete canals: Narmada dam filled up, yet benefits 'won't reach' farmers

By Our Representative
Even as the Gujarat government is making all out efforts to fill up the Sardar Sarovar dam on Narmada river up to the full reservoir level (FRL), a senior farmer rights leader has said the huge reservoir, as of today, remains a “mirage for the farmers of Gujarat”.
In a statement, Sagar Rabari of the Khedut Ekta Manch (KEM), has said that though the dam’s reservoir is being filled up, the canal network remains complete. Quoting latest government figures, he says, meanwhile, the command area of the dam has been reduced from 18,45,000 hectares (ha) to 17,92,000 ha.
“According to the website of the Sardar Sarovar Narmada Nigam Ltd, which was last updated on Friday, while the main canal, of 458 km long, has been completed, 144 km of ranch canals out of the proposed length of 2731 km remain incomplete.
Then, as against the targeted 4,569 km distributaries, 4,347 km have been constructed, suggesting work for 222 km is still pending. And of the 15,670 km of minor canal…

Ceramic worker dies: 20,000 workers in Thangadh, Gujarat, 'risk' deadly silicosis

By Our Representative
Even as the country was busy preparing for the Janmashtami festival on Saturday, Hareshbhai, a 46-year-old ceramic worker from suffering from the fatal lung disease silicosis, passed away. He worked in a ceramic unit in Thangadh in Surendranagar district of Gujarat from 2000 to 2016.
Hareshbhai was diagnosed with the disease by the GCS Medical College, Naroda Road, Ahmedabad in 2014. He was found to be suffering from progressive massive fibrosis. He is left behind by his wife Rekha sister and two sons Deepak (18) and Umesh (12),
The death of Hareshbhai, says Jagdish Patel of the health rights group Peoples Training and Research Centre (PTRC), suggests that silicosis, an occupational disease, can be prevented but not cured, and the Factory Act has sufficient provisions to prevent this.
According to Patel, the pottery industry in the industrial town of Thangadh has evolved for a long time and locals as well as migrant workers are employed here. There are abou…

Without tribal consent? 1,000 of 1,700 acres 'acquired' off Statue of Unity, Narmada dam

By Our Representative 
The Gujarat government has already acquired 1,100 acres out of 1,700 acres of the tribal land of six villages – Navagam, Limdi, Gora, Vagadia, Kevadia and Mithi – for developing tourism next to the 182-metre high Statue of Unity, the world's tallest, putting at risk the livelihood option of their 8,000 residents, and is all set to acquire rest of the land, representatives of the villagers have alleged in Ahmedabad.

Cess for Gujarat construction workers: Spending less than 10%; no 'direct help' to beneficiaries

By Our Representative
While the Gujarat government’s Building and Other Construction Workers Welfare Board, set up in 2004, as of March 31, 2019, has collected a total cess of Rs 2,097.62 crore from the the builders, it has spent less than 10% -- Rs 197.17 crore. And, as on May 31, 2019, the total cess collection has reached Rs 2,583.16 crore, said a statement issued by Bandhkam Majur Sagathan general secretary Vipul Pandya.
Pointing out that just about 6.5 lakh out of 20 lakh workers have been registered under the board, Pandya said, vis-à-vis other states, Gujarat ranks No 13th in the amount spent on the welfare of the construction workers, while 11th in the amount collected.
And while the builders are obliged to pay just about 1% of the total cost of their project, the calculation of the cess is flawed: It is Rs 3,000 per square yard; accordingly, Rs 30 per square yard is collected. “Had the cess been collected on the real construction cost, it would have been at least Rs 7,000 cr…