Case in point: estimation of Indian GDP growth

Abstract

GDP is a metric used to measure economic wellbeing. It is very tough to estimate the accurate drivers of growth and measure all the goods and services produced in an economy in a scenario of varying GDP series and baselines. Thus, the method of estimating the GDP of any country involves many underlying assumptions and guesstimates. It has led to differences in opinion on how the GDP growth of an economy is estimated. For example, the GDP growth of India between 2011-12 and 2016-17 has been officially determined to be 6.9%. This result is after the latest revised GDP calculation methodology that involved changes in the base year to 2011- 12 along with other technical changes. In contrast to that, a working paper by Arvind Subramanian1 (AS, 2019 henceforth) estimates the same to be 4.5% with a 95% confidence interval of 3.5%-5.5%, suggesting that the over-estimation is due to methodological changes. In the present study, we followed a similar approach, but the methodology has been augmented with a Mixed Effect Approach to give more generality to the results. These results are then compared with the official GDP growth estimates and with the conclusions derived by experts.