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India not growing as fast as you think; Arvind Sabramanian says actual GDP growth only this much

FE Online

Even as the controversy around GDP data ensues, former Chief Economic Advisor has said that country s growth has been overestimated by nearly 2.5 per cent under both UPA and NDA rule. The actual growth is likely to be lower, at nearly 4.5 per cent, down from 7 per cent between 2011-12 and 2016-17, The Indian Express reported citing Arvind Subramanian as saying in a research paper published at Harvard University. The analysis is based on an analysis of 17 key economic indicators that are highly correlated with the GDP growth. Several economists already have raised concerns over the quality of GDP data in the past.

Manufacturing is one of the sectors where the calculations stand highly mismeasured, he added. A part of the overestimation can be related to a key methodological change, which had an impact on the measurement of the formal manufacturing sector, he also said in the paper. Before 2011, the manufacturing value which was added in the national accounts used to be closely correlated with the component of manufacturing of the IIP and manufacturing exports, he noted. Nevertheless, the link has broken down now, according to Arvind Subramanian. “The Indian policy automobile has been navigated with a faulty, possibly broken, speedometer,” the former chief economic advisor also said in the research paper.

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Further suggesting ways to improve the growth performance of India, Arvind Subramanian said there is a need to revit the entire national income accounts estimation in order to tackle fresh opportunities created by the GST to significantly improve the same. The foremost aim of the government should be to restore the GDP growth on an urgent basis, he added in his paper.