GDP numbers are not inflated: CEA Subramanian on Economic Survey 2019-20

It said that several advanced economies such as the UK, Germany and Singapore turn out to have their GDPs misestimated when the econometric model is incompletely specified.
For representational purposes.
For representational purposes.

HYDERABAD: The Economic Survey attempts to bury overt concerns about overestimation of India’s GDP data.

Stating that growth projections aren’t inflated, Chief Economic Adviser K V Subramanian on Friday said the standing committee on economic statistics will give further suggestions on improving statistical infrastructure.

“The models that incorrectly overestimate GDP growth by 2.7 per cent for India post-2011 also misestimate GDP growth over the same time period for 51 other countries out of 95 countries in the sample,” the survey said.

It said that several advanced economies such as the UK, Germany and Singapore turn out to have their GDPs misestimated when the econometric model is incompletely specified.

Last year, former CEA Arvind Subramanian in a paper claimed that India’s GDP was overestimated by at least 2.5 per cent per year between FY12 and FY17, triggering a controversy about data collection and accuracy. He said the overestimation was on account of a change in methodology for calculating growth.

“Official estimates place annual average GDP growth between 2011-12 and 2016-17 at about 7 per cent. We estimate that actual growth may have been about 4.5 per cent with a 95 per cent confidence interval of 3.5-5.5 per cent,” Subramanian had said.

Dismissing concerns, CEA Subramanian said that cross-country comparisons are fraught with risks of incorrect inference due to various confounding factors that stem from such inherent differences.

“As a result, cross-country analysis has to be carefully undertaken so that correlation is distinguished from causality,” he said.

The base year of the GDP Series was revised from 2004-05 to 2011-12 and released on January 2015, after the adaptation of sources and methods in line with the System of National Accounts 2008 of the UN.

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