Defending his findings on overestimation of India’s GDP development charges, former Chief Financial Adviser Arvind Subramanian on Wednesday mentioned a 7 per cent-plus development within the post-2011 interval is inconsistent with efficiency of macroeconomic indicators comparable to weak exports, credit score and funding development. Subramanian additionally mentioned that his analysis paper was a validation train of GDP from demand aspect, and never a brand new technique to estimate GDP.
Talking at a panel dialogue on GDP estimation organised by NCAER, Subramanian acknowledged that there have been main shocks within the post-2011 interval comparable to de-globalisation, twin stability sheet disaster, UPA-2 coverage disintegration, consecutive agricultural droughts and demonetisation, which brought on macro engines of funding, credit score, and commerce to stall, but how might they influence GDP development marginally. No nation has grown at 7 per cent plus with exports development beneath 5 per cent, he mentioned including that the deflator for GDP was, in his view, underestimated, which led to overestimation of actual GDP.
“Number of technological questions were raised. How can GDP be ensured with just four variables? I wasn’t trying to replace the CSO. Can’t be so vain. Why should macro indicators like import, export, credit be negatively correlated with growth? Why should GVA manufacturing and IIP manufacturing have weak correlations? Why should they go from strong positive to negative correlation? It’s odd … I used a framework not to estimate but validate GDP from demand side,” Subramanian mentioned.
Subramanian had concluded that the nation’s development has been overestimated by round 2.5 share factors between 2011-12 and 2016-17. Whereas official estimates have pegged common annual development at round 7 per cent throughout this era, precise GDP development is more likely to have been decrease, at round 4.5 per cent. Subramanian additionally pointed to the criticism of him overlooking income and productiveness development in his analysis paper, to which former Chief Statistician of India Pronab Sen responded by saying that enhancements in know-how and automation has led to productiveness development.
GDP numbers don’t incorporate technological modifications, it would present up in development quickly, Sen mentioned.
Sen additionally mentioned that the findings are primarily based on correlating quantity indicators which had been anyway being utilized by CSO in nationwide accounts estimation. “Most of the volume indicators which have been used are precisely the indicators which were used by the CSO to calculate the GDP. So if you are correlating the part, and then correlating to some of those (indicators), so no surprise,” Sen mentioned whereas explaining the optimistic correlation between indicators and GDP development cited by Subramanian in his paper.
To the explanation raised by Subramanian that there isn’t any affect of productiveness development as a result of income are collapsing, Sen mentioned that income had been impacted since compensation of staff went up. “Arvind says there is no influence of productivity growth because profits are collapsing … value added is profits plus compensation for employees, the only way profits can go down is actually if compensation for employees goes up,” Sen mentioned.
“With the recent NSS report, which shows serious increase in unemployment, along with many companies’ reports that show downsizing of workforce, there is a concern … it also means you are replacing a lot of low skilled labour with few high skilled, highly paid labour. Why? The reason will be if the technology that you are using is going up. There has been a lot of fear mongering in recent years about automation pulling us down. If the manufacturing data from MCA is correct, automation has come, it has been there since last 7-8 years,” Sen added.
Sen mentioned that GST is an effective technique to measure intermediate consumption and B2B transactions however not consumption or B2C, including that the CSO must look into using company knowledge to extrapolate the casual economic system.
Non-corporate has been damage put up demonetisation, GDP sequence doesn’t observe that. If CSO doesn’t repair it, it’s an issue, he mentioned.