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Editorial

ET EDIT-Rigour, Not Diatribe, From GDP Debate

June 14, 2019 05:38 AM

COURTESY ET EDIT JUNE 14

Rigour, Not Diatribe, From GDP Debate
Former Chief Economic Adviser Arvind Subramanian’s claim, in a recent working paper, that India’s GDP growth has been overestimated by some 2.5 percentage points between 2011-12 and 2016-17 should serve as an occasion for an informed discourse among statisticians, econometricians and economists. It should lead to rigour and credibility, not diatribe. The working paper found mismatch to be particularly severe when it comes to the Index of Industrial Production (IIP). Yet, the fact is that IIP measures physical quantity, not value added. A low IIP growth does not preclude higher value-added and, hence, buoyant GDP growth, and vice versa.

The Prime Minister’s Economic Advisory Council has since stated that it would go through Subramanian’s paper and issue a “point-by-point rebuttal”. But the fact remains that India’s statistical system does call for a thorough institutional revamp, with access to expertise and oversight of leading practitioners, to shed any shadow over its credibility. Some half a century before the US became a trillion-dollar economy, it set up the National Bureau of Economic Research, to conduct studies and disseminate the findings among academics, policymakers and business professionals, so that there is constant debate, discussion and followthrough action on vital economic matters.


We need a wider discussion on GDP estimates; more credible economic data would surely lead to better policymaking. We need an official set of leading indicators, apart from IIP, as is par for the course in the mature economies. Also needed is a set of lagging indicators, to include, say, consumer confidence. In this era of big-data analytics, the proposed National Statistics Office needs to stay engaged with leading statisticians, and be open to new ideas, for routine credibility of its data.

 

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