Seven Years of India GDP Growth Was Overstated at 7% Per Year Instead of 4.5%

Official Indian estimates placed annual average GDP growth between 2011-12 and 2016-17 at about 7 percent but new research estimates 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.

India’s former Chief Economic Adviser Arvind Subramanian published a Harvard University paper that claimed that India’s GDP growth estimates from 2011-12 to 2016-17 were exaggerated by 2.5 percentage points per year. This would be a nearly 20% overestimation for the period.

The Economic Advisory Council to the Indian Prime Minister (EAC-PM) on June 19 rejected the former CEA’s claims regarding overestimated GDP growth after 2011. They claim the high-frequency indicators ignore data on services, agriculture, and tax collection.

Separately Brookings Institute has said that China’s GDP is 12% Lower

The Brookings Institute has claimed that China’s GDP growth was overstated from 2008 to 2016 and overall China’s GDP is 12% less than official figures.

21 thoughts on “Seven Years of India GDP Growth Was Overstated at 7% Per Year Instead of 4.5%”

  1. Although it was probably not Disraeli he was quoting, Mark Twain said it well:

    Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: “There are three kinds of lies: lies, damned lies, and statistics.”

  2. Small business, the Chinese always like to do business in cash or cash equivalent, and most of them either under declare or not bother to declare to the authority at all. Anyone knows about Chinese society, that the underground economy is so large which the Government do not even have a number on its volume.

  3. Freaking US gov was lying for decades about their statistics, they certainly did during Obama years… dont give me this crap.

  4. That makes total sense; for years we heared about this growth, it seemed nice news but no one was seeing its results worldwide. I see that people in the comments are also pointing out that chinese numbers are funky as well-I agree, but there is difference between cases in that China had more consistent growth over longer period of time; which means they are ahead-no matter how funky their numbers are; and secondly-the sheer volume of this economy is so enormous that it doesnt matter; they are too big and therefore of great power. Scale means alot. At some point quantity is its own quality. Geoeconomically they are superpower.

  5. It’s not just GDP, but it’s natural resources and everything else. The problem is the financial press generally takes any government statistics at face value and publishes them as fact. An example of resource inflation is Venezuela, in 2006 Venezuela’s recoverable oil reserves were estimated at 90 billion barrels until Chavez unilaterally decided to multiply them by 4 and declare his real reserves were 360 billion barrels. Right before he went on a crazy debt binge and borrowed a $100 billion plus from international lenders based on said non existent oil reserves. At some point the World is going to have start writing off Trillions in non existent GDP and resources that so many third world dictators and countries have just wished into existence.

  6. The University of Chicago estimated a similar 30% increase in China’s GDP as well. The primary reason is that real GDP is measured by measuring the total economic activity in monetary terms and then subtracting inflation. In the case of China simply taking a 8% increase in Monetary activity and then subtracting 2% for inflation instead of the real rate of 4% will boost growth from 4% to 6% and give you a 30% boost in GDP. The authors of the study estimate that all authoritarian regimes inflate their GDP by 1.15 to 1.30 percent (15% to 30%) a year. And when there is no one in power to correct your numbers the answer for an authoritarian would be why not do it. When Enron did this and systematically inflated profits there was a huge reckoning. At some point a similar reckoning will need to occur for China, Russia, Turkey, and other regimes around the World who have engaged in similar practices for the last 20 years.

  7. Bad debt robs from GDP, then this is a case for lower interest rates, assist in higher GDP and move wealth back to lower economic classes, and allows the treasuries around the world reduce interest payments and National debts

  8. LOL. Now way! You’re telling me Indian Indians from India we’re lying about something? Must be the IT department.

  9. Um, if the government tells me that economy grew 20%, while my personal income grew alot less, I vote against the government.

  10. The incentive of an economy that operates in a relatively free market environment to create reliable data is greater than you appreciate.

  11. China is another nation whose real GDP is roughly half of what is claimed. Laughable, but this is the third world we are talking about.

  12. Is there any external statistics that would be indicators of GDP growth like maybe stock market total capitalization or maybe total sum of money in the banks?

  13. The reports of decentralizing our manufacturing away from China is greatly exaggerated. Maybe some ship and relabel effort, but I doubt anything major.

  14. The labor unions in India are a problem too, as is the culture of corruption. The story of the postal worker who didn’t come into work for 19 years before finally being fired comes to mind.

    U.S. or not, India has tremendous growth potential. However the seeming permanence of the issues that hold it back has to make one wonder if said slack isn’t also permanent.

  15. All true, but that still doesn’t change the fact that statistics offices are biased to report higher than actual growth and lower than actual inflation. This is true of virtually every government, the difference is in the degree to which that bias occurs. In an open democracy that bias will be on the low end. In a closed society the bias will be very high.

    As an aside, in a large developing economy like India data collection for macro-level statistics is very challenging.

  16. India still has a lot of slack for growth expansion. If they would just get the government out of the way they should be able to pick up the pace a bit more regardless of whether Subramanian is correct or not. India could stand to benefit greatly now that the US is decentralizing our manufacturing away from China.

  17. So what ? Governments usually lie about results of their policy for the purpose of reelection. Chinese government at least doesn’t have to lie to be reelected.

  18. India is a democracy with free press and free information. Unlike China, it does not use lying about economic data as a tool. It is not trying to become a super power for the sake of it, also it does not sit on three bubbles that it is trying to hide for the safety of the regime.

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