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India's GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications

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  • Arvind Subramanian
Abstract
India changed its data sources and methodology for estimating real gross domestic product (GDP) for the period since 2011-12. This paper shows that this change has led to a significant overestimation of growth. Official estimates place annual average GDP growth between 2011-12 and 2016-17 at about 7 percent. We estimate that actual growth may have been about 4.5 percent with a 95 percent confidence interval of 3.5 - 5.5 percent. The evidence, based on disaggregated data from India and cross-sectional/panel regressions, is robust. Lending further credence to the evidence, part of the overestimation can be related to a key methodological change, which affected the measurement of the formal manufacturing sector. These findings alter our understanding of India’s growth performance after the Global Financial Crisis, from spectacular to solid. Two important policy implications follow: the entire national income accounts estimation should be revisited, harnessing new opportunities created by the Goods and Services Tax to significantly improve it; and restoring growth should be the urgent priority for the new government.

Suggested Citation

  • Arvind Subramanian, 2019. "India's GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications," CID Working Papers 354, Center for International Development at Harvard University.
    • Handle: RePEc:cid:wpfacu:354
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    File URL: https://growthlab.cid.harvard.edu/files/growthlab/files/2019-06-cid-wp-354.pdf
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    References listed on IDEAS

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    1. Amey Sapre & Rajeswari Sengupta, 2017. "Analysis of Revisions in Indian GDP Data," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 18(4), pages 129-172, October.
    2. Thomas Tørsløv & Ludvig Wier & Gabriel Zucman, 2023. "The Missing Profits of Nations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(3), pages 1499-1534.
    3. Ministry of Finance, Government of India,, 2017. "Economic Survey 2016-17," OUP Catalogue, Oxford University Press, edition 2, number 9780199477661.
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    Cited by:

    1. Kasey Chatterji-Len & William Nober & Maxim L. Pinkovskiy & Xavier X. Sala-i-Martin, 2024. "Inequality Within Countries is Falling: Underreporting Robust Estimates of World Poverty, Inequality, and the Global Distribution of Income," Staff Reports 1125, Federal Reserve Bank of New York.
    2. Ajit K. Ghose & Abhishek Kumar, 2021. "India’s Deepening Employment Crisis in the Time of Rapid Economic Growth," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 64(2), pages 247-279, June.

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    Keywords

    GDP growth;

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