Arvind Panagariya, currently serving as chairman of the 16th Finance Commission and former vice chairman of NITI Aayog, has strongly dismissed allegations that India's Gross Domestic Product (GDP) numbers are a result of "statistical gymnastics." Panagariya argues that manipulating GDP growth rates over an extended period would be exceedingly difficult due to fundamental economic principles.
Why Manipulating GDP Growth Is Challenging
Panagariya explained that any attempt to inflate growth figures in one year would automatically raise the base for calculating growth in the subsequent year. This compounding effect makes it unsustainable to maintain an artificially high growth rate without continuously increasing the extent of manipulation, a scenario he deems improbable.
"Faking GDP level maybe you can do, but faking growth is a very difficult task. Because today you fake and exaggerate your growth by two percentage points, tomorrow that 2% extra two percentage points goes into the base of calculating the growth rate for the following year," Panagariya stated, highlighting the technical hurdles involved.
He drew a clear distinction between potentially manipulating the absolute level of GDP and attempting to sustain an artificial growth trajectory, asserting the latter is far more complex to execute and maintain discreetly.
Independence of Statistical Bodies
Drawing on his experience within NITI Aayog from 2015 to 2017, Panagariya affirmed that the government does not exert control over the GDP figures released by the Ministry of Statistics and Programme Implementation (MOSPI). He noted that government officials, including himself during his tenure, would typically be informed of the numbers only shortly before their public release.
"The government will simply be told what the numbers are. And usually on the day that the MOSPI releases numbers, I will get to know a little bit earlier. The government would be told about the same time. So it is always MOSPI's call," he elaborated, reinforcing the autonomy of the statistical process.
Addressing the GDP Deflator Debate
Panagariya also addressed criticisms regarding the GDP deflator, a key metric used to convert nominal GDP into real GDP. Some critics, including former chief statisticians, have suggested that a low deflator could artificially inflate real growth figures. While acknowledging this as a potentially "fair point," he maintained that the reported numbers reflect observed economic realities.
He suggested that rather than simply leveling charges, critics should propose specific methodological improvements to address perceived issues. Panagariya cited the volatility of indices like the wholesale price index, which can sometimes enter negative territory, as an example of complex statistical phenomena that require careful consideration rather than immediate accusations of manipulation.
These discussions come as India's economy recorded a 7.8% growth rate in the April-June quarter, surpassing earlier forecasts. Despite this robust performance, the opposition Congress party has expressed skepticism, questioning the veracity of the growth figures.