The GDP (gross domestic product) number controversy is hugely important for all those looking at stock market-linked returns for their money. Retail investors who are today pouring in almost ₹1 trillion a year, or about ₹8,000 crore a month, in equity funds, are basing their investments on Indian growth. That this 7-8% growth could have been false is cause for concern to these households. What happened to make them worry is this: India’s former chief economic adviser (CEA) Arvind Subramanian gave legs to the idea that India’s growth numbers were overstated in his paper, titled India’s GDP Mis-estimation: Likelihood, Magnitudes,Mechanisms, and Implications.
He used a set of 17 indicators that are strongly correlated to GDP growth to estimate it and found a 2.5 percentage point overestimation per year for a six-year period ending 2017 (across UPA-2 and NDA-1). That a loud and vocal set of people is willing to simply take this number of 4.5% GDP growth on the basis of one academic paper, setting aside the entire statistical machinery of India whose only job is to do this math using well-established processes and systems, points to a hurry in grabbing any evidence they can find to suit an agenda. If somebody has already decided that this government is wrong no matter what, then they use any piece of data—real or imaginary—to support that belief. The government is putting out its response.