India Refutes ‘Unfounded’ Criticism About Government’s GDP Data
(Bloomberg) -- India rejected a growing view among the global investment community and economic commentators that data measuring country’s gross domestic product growth was inflated.
The government’s top economic adviser Krishnamurthy Subramanian used the Economic Survey, a document that takes stock of the state of the economy, to address any doubts. Based on district level data and the growing dominance of the services sector in India, growth has picked up in the formal sector after the country overhauled the data, he wrote.
India switched to a 2011-12 base year for calculating GDP and released data under the new series on Jan. 30, 2015, according to the survey, presented in Parliament by Finance Minister Nirmala Sitharaman Friday.
“Correctly specified models that account for all unobserved differences among countries as well as differential trends in GDP growth across countries fail to find any mis-estimation of growth in India or other countries,” he said. “Concerns of a mis-estimated Indian GDP are unsubstantiated by the data and are thus unfounded.”
India’s economic data has come under intense scrutiny after some commentators said the GDP data was unusually buoyant despite distress in sectors like automobiles and power generation. In a paper last year by Harvard’s Center for International Development, Arvind Subramanian, a former adviser to the finance minister, argued that growth was about 2 percentage points lower on average from fiscal years 2012 to 2017 if one used alternative data, like vehicle sales and electricity consumption.
According to the survey, models that incorrectly over-estimate GDP growth by 2.7% for India after 2011 also mis-estimate GDP growth over the same time period for 51 other countries out of 95 countries in the sample. Several advanced economies such as the U.K., Germany and Singapore turn out to have their growth rates mis-estimated when the econometric model is incompletely specified.
It isn’t just India’s GDP data that’s come under scrutiny in recent months. Before the general election, which Prime Minister Narendra Modi’s party convincingly won in May last year, the government was blindsided by the leak of an official report that showed the unemployment rate had hit a 45-year high. The government later said the data wasn’t comparable.
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