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Former CEA Arvind Subramanian speaks on back series GDP data and autonomy of RBI

Former CEA Arvind Subramanian speaks on back series GDP data and autonomy of RBI

The former Chief Economic Adviser (CEA) Arvind Subramanian, in an interview with the PTI,  called for an investigation by experts into the back series GDP data of India to clear doubts and build confidence in the country. He opined that the “puzzle” about the data needs to be explained. According to him, the institutions which do not have technical expertise in calculating the GDP data should not be involved in the process, apparently referring to the Niti Aayog. The well known economist also criticised demonetisation in his new book titled ‘Of Counsel: The Challenges of the Modi-Jaitley Economy’. He stressed the need to explain the issues involved in the back series data just to create confidence and eliminate any uncertainty or doubts. He also spoke on the controversy over the Niti Aayog’s presence at the release of the GDP back series data by the Central Statistics Office (CSO) last month. He opined that (only added) experts should have the main job of producing and explaining data.“I think this [calculation of GDP] is a very technical task and technical experts should do the task, institutions that don’t have technical expertise should not be involved in this.” It may be noted that data of past years using 2011-12 as the base year instead of 2004-05, the CSO last month lowered the country’s economic growth rate during the previous Congress-led UPA’s regime.

On the issue of demonitisation and Mr. Subramanian criticism of the policy after he demitted the office of the Chief Economic Adviser to the Government of India, he said that “this is not a Kiss and Tell memoir, that is for gossip columnists.” Referring to criticism that he did not speak on demonetisation when he was working for the government and now he is raising the issue to sell his book, Mr. Subramanian said that whatever people say, it is important to ananlyse why even after 86% reduction in cash [after demonetisation], there little impact on the economy; was it due to current GDP calculation method. It was important according to him to understand is it because “we are not measuring GDP correctly, or is it because our economy is very resilient,” Mr. Subramanian who currently teaches at Harvard Kennedy School remarked.

In the six quarters before demonetisation, growth averaged 8% and in the seven quarters after, it averaged about 6.8% [with a four-quarter window, the relevant numbers are 8.1% before and 6.2% after],” Mr. Subramanian wrote in the chapter “The Two Puzzles of Demonetisation — Political and Economic”.

On the recent spat between the government and the Reserve Bank of India (RBI) over a host of issues, Mr. Subramanian opined that the autonomy of the RBI must be protected because the country will benefit by having strong institutions. He, however added, “But, I think there must also be cooperation, consultation and everything. Both have to happen.”

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