Standing firmly by his research which raised doubts over India’s GDP growth, former chief economic advisor (CEA) Arvind Subramanian has yet again raised questions over consistency between projected growth and other macro indicators. In a new research paper, the noted economist has countered the arguments against his earlier research by arguing that even after a series of shocks hitting the economy between 2011-2016, the GDP growth fell just marginally to 6.9 per cent from 7.7 per cent. It’s not possible that the adverse macro shocks had such a minor impact on GDP growth, he argued in his new paper — Validating India’s GDP Growth Estimates. The most important task for the government now is to revisit the GDP methodology, he added.
In his earlier research paper released in June 2019, Arvind Subramanian had claimed that country’s GDP growth has been overestimated by 2.5 percentage points between 2011 and 2016. Here is the four-point rebuttal
The economy was largely facing headwinds in form of loss of exports, over-leveraged corporate sector, and rising NPAs for banks during the period. The noted economist argued that all these shocks should have brought down GDP growth substantially, as against the real number.
On government’s argument about GST and IBC being growth pushers, Arvind Subramanian said the NDA government did bring reforms such as GST and IBC, but these would only “deliver growth benefits in the medium term”.
Further countering the argument by a few economists that the new GDP series takes into account a rise in productivity, former CEA said, “It is much more likely that during this difficult period productivity actually collapsed. Further, if indeed productivity had risen, then it would have resulted in higher profits for firms.” However, this has not remained a case, he added.
Arvind Subramanian also said that it is difficult to find out the real impact of indirect taxes on health of economy since the government sharply raised the excise duty on petroleum during this period as crude prices dropped globally.