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Harvard Economists Face Modi's Censure on India GDP Surprise

Bloomberg logoBloomberg 02-03-2017 Jeanette Rodrigues and Bibhudatta Pradhan
BC-INDIA-MODI-HARVARD-2© Jeanette Rodrigues and Bibhudatta Pradhan BC-INDIA-MODI-HARVARD-2

(Bloomberg) -- It’s not the economy, stupid.

Prime Minister Narendra Modi took a dig at critics of his cash ban after government data showed surprisingly strong growth that helped India retain its position as the world’s fastest-growing big economy.

"Well known intellectuals from Harvard and Oxford, who have been at key positions in the Indian economic system, had said the GDP would go down by 2 percent, some others said it would go down by 4 percent," Modi said at a campaign speech Wednesday in the key electoral state of Uttar Pradesh, without naming anyone. "On one hand, there are these intellectuals who talk about Harvard, and on the other, there is this son of a poor mother, who is trying to change the economy of the country through hard work."

"In fact, hard work is much more powerful than Harvard," he said.

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Gross domestic product data has become the focus of divisive debate in India, as Modi’s critics and supporters tussle over the impact of his unprecedented cash ban announced in November. At stake is the credibility of the nation’s outlook to foreign investors, who may choose to eschew a stock-market rally.

BC-INDIA-MODI-HARVARD-2© Jeanette Rodrigues and Bibhudatta Pradhan BC-INDIA-MODI-HARVARD-2

GDP grew 7 percent in October-December, data showed Tuesday, a slight slowing from the previous year’s 7.3 percent but far stronger than the median 6.1 percent estimate in a Bloomberg survey of economists. While this early data doesn’t capture the note ban’s impact on small companies and unorganized workers -- a fact the finance ministry’s advisers acknowledged last month -- policy makers and analysts had predicted a slump followed by a sharp recovery.

The government’s top statistician on Thursday said the entire data set will be available only next year and economists including at HSBC Holdings Plc. expect the numbers will be revised as clarity emerges. The data runs counter to underlying indicators such as factory output and credit growth.

"This does not add up," Sonal Varma, an economist at Nomura Holdings Inc., wrote in a report after the data was published. "Is India becoming another China, with incredible growth momentum and statistics nobody quite believes?" Bloomberg View columnist Mihir Sharma wrote on Thursday.

BC-INDIA-MODI-HARVARD-2© Jeanette Rodrigues and Bibhudatta Pradhan BC-INDIA-MODI-HARVARD-2

Among critics of demonetization are Nobel Prize winner Amartya Sen, a Harvard professor; Lawrence Summers, former U.S. treasury secretary and president emeritus of Harvard University; Kaushik Basu, former chief economist to the World Bank who also advised India’s government and taught at Harvard; former Finance Minister Palaniappan Chidambaram, who was educated at Harvard; and Modi’s predecessor Manmohan Singh, who read economics at Oxford. Singh had told lawmakers the cash ban could strip as much as 2 percentage points off GDP.

"The prime minister making a sarcastic dig at an election rally has revealed his political desperation," said Sanjay Jha, a spokesman of the main opposition Congress party. "These are estimates that are bound to see a downward revision, because in reality they have not factored in the impact on the informal sector, which was most affected by the demonetization. The number deserves further public scrutiny."

Jagdish Thakkar, a spokesman in the Prime Minister’s Office, didn’t answer calls.

ALSO READ: How on earth did India come up with these GDP numbers?

‘Same Statistics’

"As soon as the data was published and their lies were exposed, they have started saying that the data is incorrect, questioning ‘where has Modi brought these numbers from?’," Modi said at another rally in Uttar Pradesh on Wednesday. "The numbers come from the same place they always were coming from. We are using the same statistics that the country has used since the past 10 years," he added.

India changed its method of calculating GDP in 2015, a year after Modi took office, and several economists have questioned it ever since.

"Those who are being projected as Harvard and Oxford supporters are those who have been very strongly critical of various policies the government adopted, including demonetization," said Sandeep Shastri, pro-vice chancellor at Jain University in Bengaluru. 

"The prime minister stands to project himself as representing a line of thinking which challenges what could be called the mainstream or elite way of looking at issues" and divergence between the extremes is only set to increase, he said.

(Updates with critics of demonetization in ninth paragraph.)

--With assistance from Anirban Nag

To contact the reporters on this story: Jeanette Rodrigues in Mumbai at, Bibhudatta Pradhan in New Delhi at

To contact the editors responsible for this story: Ruth Pollard at, Andy Sharp

©2017 Bloomberg L.P.

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