There is a popular aphorism in acronym form since the advent of the computer age: GIGO (Garbage in Garbage Out). Essentially it means that if we enter trash as an input we are with certainty likely to see stench as an output, the two are intertwined. Something similar has happened to Indian economy data which, for a considerable period since the BJP assumed power in May 2014, has looked increasingly doctored. No further corroboration was needed as the erstwhile Chief Economic Adviser, Dr. Arvind Subramanian, has cast grave aspersions on the authenticity of the GDP growth numbers. In a research paper submitted at Harvard University, Subramanian, in fact, assessed that approximately 2.5 % of India’s GDP was probably inflated. This is a stunning revelation from a renowned economist who mysteriously enough did not make the startling disclosure while he was advising the Modi government, but better late than never. Not surprisingly, the CSO data for the last quarter of the fiscal year 2018-19 lowered India’s GDP to 5.8% the lowest in twenty quarters. At some point, the chickens come home to roost.
Thanks to blatant data manipulation, the credibility of Indian official statistics has become a monumental joke. Noted analyst and author Ruchir Sharma of Morgan Stanley did not mince words when he stated that India has become a laughing stock in the eyes of several foreign investors. What- you- see- is- not- what- you- get syndrome has made India appear closer to China in terms of opacity. This could be a long-term damage which may be hard to restore. Ground realities confirm the bizarre dichotomy of the “world’s fastest growing economy” having an escalating job crisis (at a record 45 year high), agrarian distress and dismal private investment, among many other insipid macro-economic fundamentals. In short, we are seeing flashy headlines of fudged numbers which helps the government make boastful claims while, in fact, our GDP growth could be closer to 4 %. This issue is no longer just about cerebral minds indulging in research warfare but needs the engagement of civil society and the common man. Is India being willfully taken for a jolly ride? Why was the data concealed and finally released only after the election results were announced on 23rd May, 2019? As a fully-informed democratic society should we let such outrageous duplicitousness go by uncontested?
There has been a secular deceleration of India’s GDP over the last 4 quarters; it has slipped from 8.0 to 5.8 %. The initial symptoms are suggestive of a further fall in the first quarter of FY 2019-20 as political uncertainty had led industry to deferring its expansion plans and kept even Foreign Direct Investment investors cautious. Last year, FDI itself declined for the first time in six years. Incidentally, Foreign Institutional Investors were net sellers in the Indian equity/debt markets during the last financial year. The “appetite” for India has significantly diminished and contrasts the irrational exuberance of Dalal Street in Mumbai. The RBI, which itself has become a virtual puppet of the political establishment has also lowered the forecast for 2019-20 to 7.2 %.
Public spending is hardly the panacea for a country like India aspiring to become a middle-income country. What we critically need is huge private capital investment to create a multiplier effect. Despite RBI lowering repo rates to make cost of borrowing cheaper, there has hardly been a spectacular credit offtake as large businesses are already saddled with Non-Performing Assets, excess capacity, falling demand and worrying headwinds in global trends. The USA-China tariff war, potential military conflict in the Middle East on account of US-Iran tensions, uncertainty over the future of the Brexit referendum and a lower forecast of the world economy by World Bank tell us that the near future has a bearish outlook.
What India needs is structural modifications particularly in the area of agricultural productivity (our annual growth last year was a meagre 2.9 %), public-sector bank reforms (Gross NPA’s of banking sector were at 9% of outstanding loans as of March 2019), focused export-growth strategy and targeted government expenditure in crucial social sectors. The current estimates suggest that the government has breached fiscal deficit targets, thanks to poor tax collections (on account of falling GDP growth) and populist measures. India has limited elbow room for fiscal adventurism.
A few days ago, Prime Minister Narendra Modi made one of his grandiloquent assertions all over again; India would become a USD 5 trillion economy by 2024. This was once again the usual pontification and the selling of pipe dreams, much like the doubling of farmer incomes by 2022 that is nigh impossible, but was good enough for a phenomenal electoral triumph. Clearly, the more things change the more they stay the same.
(Author is National Spokesperson of the Indian National Congress party and President, All India Professionals Congress, Maharashtra.)