New Delhi, Jun 13: A day after Arvind Subramanian's sensational disclosure that India's GDP has been overestimated by an astronomical 2.5 percentage points between 2011-12 and 2016-17 which immediately attracted a strong reaction from the government, the Prime Minister's Economic Advisory Council came to the Centre's defence, saying that proper methodology was followed and that experts were consulted in calculating the country's overall economic growth estimates.
The council also termed parts of former chief economic advisor's report "most unusual exercise" that attempted to "sensationalize" what should have been a proper academic debate.
In a statement put out on Wednesday afternoon, the council, headed by economist Bibek Debroy, said it would come out with a "point-to-point rebuttal" in due course, indicating the seriousness attached by the government to buttress assertions made in Subramanian's research paper.
"It is worth noting that the Base Year of India's income calculations shifted to 2011-12 on the basis of recommendations of several committees with experts in National Income Accounting. It was on the basis of these recommendations, started in 2008, that the Government implemented the change from January, 2015," a government statement reflecting council's views said.
"Therefore, it is wrong to suggest that the views of experts have not been taken into account while changing the Base Year or weights or switching from Annual Survey of Industries (ASI) to Ministry of Corporate Affairs (MCA) 21," the statement added.
In his recent research paper published by Harvard University, the former CEA has said there is a possibility of substantial overestimation in the growth figures while stating that the actual GDP growth between 2011-12 and 2016-17 was around 4.5% as against 7%.
Subramanian has suggested that India's GDP growth estimate has been overestimated by around 2.5 percentage points between 2011-12 and 2016-17, a period that covers the years during both the UPA and the NDA governments.
The adoption of a new GDP series to measure the country's economic growth, months after the government itself slashed previous UPA-era GDP growth rate for 2010-11 from the earlier estimated 10.3% to 8.5%, has fuelled controversy.
"In his paper, Dr. Subramanian has used cross-country regressions to estimate what India's GDP should be. Using cross-country regressions to estimate GDP is a most unusual exercise, as is the suggestion that any country's GDP that is off the regression line must be questioned. The proxy indicators that he used can also be questioned. Nor does this exercise allow for GDP increases on the basis of productivity gains," the council said in the statement.
It added that a country's GDP is in nominal terms and any exercise should be on the basis of nominal figures, not real growth rates.
"The Economic Advisory Council will examine in detail the estimates made in Dr. Arvind Subramanian's paper and come out with a point-to-point rebuttal in due course. At the moment, it is felt that any attempt to sensationalize what should be a proper academic debate is not desirable from the point of view of preserving the independence and quality of India's statistical systems, all of which the former CEA is familiar with," the council said.
It also said that some of the issues that Subramanian is raising now should have been raised while he was working as CEA, "though by his own admission, he has taken time to understand India's growth numbers and is still unsure."
PM’s Economic Advisory Council junks Arvind Subramanian paper, plans rebuttal