India GDP growth rate between 2011-12 and 2016-17 should be about 4.5 percent instead of the official estimate of close to 7 percent, former chief economic adviser Arvind Subramanian said in a research paper published at Harvard University. (Photographer: Prashanth Vishwanathan/Bloomberg)

Government Says Right Methodology Followed For GDP Estimation

The Indian government on Tuesday said it follows accepted procedures and methodologies for arriving at projections of national income, dismissing the contention raised by former chief economic adviser Arvind Subramanian regarding over-estimation of India GDP data.

The Ministry of Statistics and Programme Implementation said that its projections on expansion of India’s gross domestic product are broadly in-line with estimates of various national and international agencies.

In a paper published at Harvard University, Subramanian deduced that India’s economic growth rate has been overestimated by around 2.5 percentage points between 2011-12 and 2016-17 due to a change in methodology for calculating GDP. India GDP growth rate between this period should be about 4.5 percent instead of the official estimate of close to 7 percent, he said.

The government agency said Subramanian’s estimate is primarily based on an analysis of indicators, like electricity consumption, two-wheeler sales, commercial vehicle sales using an econometric model and associated assumptions. “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.”

With any base revision for GDP estimation, 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 said.

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
Ministry of Statistics and Implementation

The ministry stressed that with structural changes taking place in the Indian economy, it is necessary to revise the base year of macroeconomic indicators like GDP, Index of Industrial Production, Consumer Price Index, periodically to ensure that indicators remain relevant and reflect the structural changes more realistically.

Such revisions not only use the latest data from censuses and surveys, but they also incorporate information from administrative data that have become more robust over time.

In India, the Base Year of the New GDP Series was revised from 2004-05 to 2011-12 and released on Jan. 30, 2015, after adaptation of the sources and methods in line with the System of National Accounts 2008.