India Rejects That It Spent Years Pumping Fake GDP Data
Just as the Indian economy expanded at a much slower pace in 2019, and electricity consumption in the country over the year plunged, there’s new criticism that Indian officials have been publishing phony economic statics to boost growth numbers.
Overinflated GDP data started to print when the country shifted to a 2011-12 base year on Jan. 30, 2015, Bloomberg noted.
However, Finance Minister Nirmala Sitharaman told Parliament on Friday that there was no “misestimation of growth” after the country overhauled the data.
“Correctly specified models that account for all unobserved differences among countries, as well as differential trends in GDP growth across countries, fail to find any misestimation of growth in India or other countries,” Sitharaman said.
“Concerns of a misestimated Indian GDP are unsubstantiated by the data and are thus unfounded.”
Harvard’s Center for International Development Arvind Subramanian argues that the overhaul overstated GDP figures by at least two percentage points from 2012 to 2017.
Fifty-one countries have also had over-estimated GDP growth since 2011, said Subramanian. Several advanced economies, including the U.K., Germany, and Singapore, have also been found to overestimate economic growth.
Prime Minister Narendra Modi rode the wave of fake GDP data from 2014 through 2017, but growth started to turn down by 2018; he has since been heavily criticized for a slumping economy.
GDP controversy has become a national topic in Indian newspapers, which is a big blow to Modi, who has promised to “Make India Great Again” with a $5 trillion economy.
“People have raised issues about the dodginess of the Indian numbers, and that is a real problem,” said Steve Hanke, a professor of applied economics at Johns Hopkins University. “Once you lose confidence in the statistical services, it creates a lot of uncertainty in the markets. From the investor’s point of view, it raises a red flag.”