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India’s economic growth estimates overstated: Nobel laureate Deaton

india Updated: Oct 27, 2015 01:08 IST
Zia Haq
Zia Haq
Hindustan Times
Angus Deaton

British-born economist Angus Deaton of Princeton University speaks in a news conference after winning the 2015 economics Nobel Prize on the Princeton University campus in Princeton, New Jersey October 12, 2015.(REUTERS)

Princeton economist Prof Angus Deaton, who won this year’s Nobel prize in Economics, has said India’s estimates of economic growth — now projected to overtake China’s — could be exaggerated, and worryingly, the country’s poverty levels might be higher than what official numbers show.

In an exclusive interview to HT, Deaton — who has worked a great deal on poverty, consumption and nutrition in India — struck a cautionary tale for Asia’s third-largest economy. Without effective services for the poor, initial decades of economic growth could stoke inequalities, Deaton said. This could lead to a US-like situation, where “the rich capture more than their share of political power, so that the state stops serving the majority of people”.

“I think it is widely recognised that the national accounts in India are relatively weak. So what I am most worried about is that growth is not as high as the accounts show.” National accounts refer to a country’s accounting methods for calculating economic growth.

“Revisions that increase growth are more readily accepted than revisions that reduce growth. So I am more worried about growth being overstated than poverty being understated,” he said.

Through the 1990s, Deaton spearheaded research to analyse welfare and poverty. His data analysis at the individual level helped explain astonishing levels of malnutrition in India, helping to shape a public campaign to eliminate hunger and, later, the National Food Security Act.

“Economic growth is very important, but it is not the only thing, and it must be accompanied by sharing with those who are left behind, through effective social services and provision,” the Scottish-born American economist said.

Read | Interview with Prof Angus Deaton

Earlier this year, India’s Central Statistical Office revised its methodology to measure the country’s gross domestic product or GDP, which resulted in growth figures to gallop. This baffled many economists. Senior government officials have, however, defended the new methodology as “scientifically sound”.

Referring to India’s poverty count, Deaton said there was “surely some omission in the surveys, which would mean that poverty is understated”.

Not having a fair idea of how many Indians were poor can result in critical policy gaps. India’s official poverty line is still mired in disputes. According to the Suresh Tendulkar methodology, 21.2% of Indians are poor. A panel led by economist C Rangarajan then estimated that 29.5% of the population, or an additional 94 million, were poor.