Sharp revisions in the GDP growth rate tell a tale of uncertain times

Is the growth modeling fraught with errors? If so, how can the policy makers frame policies in such a scenario?

Seven years ago, the 2010-11 Economic Survey authored by then chief economic advisor (CEA), Kaushik Basu, had predicted the gross domestic product (GDP) growth rate at nine per cent, give or take 0.25 per cent, for the year 2011-12.

As the year advanced, this optimism gave way to pessimism and the mid-year review of the economy tempered the expectations by pegging the growth at 7.25-7.75 per cent for 2011-12. The actual growth turned out to be 6.5 per cent for the year, according to the first provisional estimates (based on the old series of 2004-05).

This background amply substantiates a