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

Importance of Bangladesh for India amidst 'growing might' of China in South Asia

By Samara Ashrat*  The basic key factor behind the geopolitical importance of Bangladesh is its geographical location. The country shares land borders with Myanmar and India. Due to its geographical position, Bangladesh is a natural link between South Asia and Southeast Asia.  The country is also a vital geopolitical ally to India, in that it has the potential to facilitate greater integration between Northeast India and Mainland India. Not only that, due to its open access to the Bay of Bengal, Bangladesh has become significant to both China and the US.

Unlike other revolutionaries, Hindutva icon wrote 5 mercy petitions to British masters

By Shamsul Islam*  The Hindutva icon VD Savarkar of the RSS-BJP rulers of India submitted not one, two,or three but five mercy petitions to the British masters! Savarkarites argue: “There are no evidences to prove that Savarkar collaborated with the British for his release from jail. In fact, his appeal for release was a ruse. He was well aware of the political developments outside and wanted to be part of it. So he kept requesting for his release. But the British authorities did not trust him a bit” (YD Phadke, ‘A complex Hero’, "The Indian Expres"s, August 31, 2004)

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Buddhist shrines were 'massively destroyed' by Brahmanical rulers: Historian DN Jha

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

'A disaster in the making': Expansion of oil palm plantations in Northeast India

By Rupa Chinai, Ravi Chellam*  Until a few decades ago, India was nearly 100% self-sufficient in edible oils, with a diverse variety of oilseeds that were grown and consumed sustainably in keeping with the ecological and climatic conditions of different regions in the country. Today, India is highly reliant on palm oil imports to meet its vegetable oil demands. 

'BBC film shows only tip of iceberg': Sanjiv Bhatt's daughter speaks at top US press club

By Our Representative   The United States' premier journalists' organisation, the National Press Club (NPC), has come down heavily on Prime Minister Narendra Modi for recent "attacks on journalists in India." Speaking at the screening of an episode of the BBC documentary “India: The Modi Question,” banned in India, in the club premises, NPC President Eileen O’Reilly said, “Since Modi came to power we have watched with frustration and disappointment as his regime has suppressed the rights of its citizens to a free and independent news media."

Chinese pressure? Left stateless, Rohingya crisis result of Myanmar citizenship law

By Dr Shakuntala Bhabani*  A 22-member team of Myanmar immigration officials visited Rohingya refugee camps in Cox's Bazar to verify more than 400 Rohingya refugees as part of a pilot repatriation project. Does it hold out any hope for the forcibly displaced people to return to their ancestral homes in the Rakhine state of Myanmar? Only time will tell.

China ties up with India, Bangladesh to repatriate Rohingyas; Myanmar unwilling

By Harunur Rasid*  We now have a new hope, thanks to news reports that were published in the Bangladeshi dailies recently. Myanmar has suddenly taken initiatives to repatriate Rohingyas. As part of this initiative, diplomats from eight countries posted in Yangon were flown to Rakhine last week. Among them were diplomats from Bangladesh, India and China.

40,000 Odisha adolescent girls ask CM: Why is scheme to fight malnutrition on paper?

By Our Representative  In unique a postcard campaign to combat malnutrition, aimed at providing dietary diversity, considered crucial during adolescence, especially among girls, signed by about 40,000 adolescent girls from over 10,000 villages, have reminded Odisha chief minister Naveen Patnaik that his government's Scheme for Adolescent Girls (SAG), which converged with Pradhan Mantri Poshan Shakti Nirman  ( POSHAN ) 2.0 in 2021, is not being implemented in the State.

Natural farming: Hamirpur leads the way to 'huge improvement' in nutrition, livelihood

By Bharat Dogra*  Santosh is a dedicated farmer who along with his wife Chunni Devi worked very hard in recent months to convert a small patch of unproductive land into a lush green, multi-layer vegetable garden. This has ensured year-round supply of organically grown vegetables to his family as well as fetched several thousand rupees in cash sales.