India enters quagmire of 'mistrust economy', as GDP growth officially slips to 4.5%
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| Subramanian Swamy with Modi |
Perplexed, he kept quiet for a little more than a minute, looked around for an answer, and finally got one from the then finance secretary, who, sitting behind him, murmured something in his ear. “It so happens that when your GDP rate is very high for several years, it reaches a plateau, and then the possibility of as big a rise becomes difficult”, he told the media.
A good explanation, I thought, but wondered, why was it that he continued harping on the double rate of growth for so long, when it wasn’t the case. During those years, data wasn’t easily accessible. There was no internet, so comparisons too were not easy. Documents, especially the official ones, weren’t easy to get either. If not experts, at least reporters would rely heavily on whatever higher ups would dished out.
Thanks to a senior Gujarat government bureaucrat, who brought the figure of 5.1% state GDP growth rate to my notice, I could get the official report, which clearly mentioned the “slip”. There was reason to wonder: Was Modi trying to showcase a higher rate of growth only showcase Gujarat’s growth story at a time when he was under heavy criticism for “mishandling” the post-Godhra anti-minority communal flareup in 2002?
Two plus decades later, one is tempted to ask: Has Modi learned a lesson? It doesn’t seem so, lest even those who have been supporting his economic policies wouldn’t begin expressing doubts in what is happening with the economy. Indeed, his effort to put political considerations higher than economic ones appears to have added confusion around the country’s latest GDP figure for the second quarter of the current financial year, 4.5%, the lowest in the last six years.
While the deceleration is there for all to see, the government continues to claim that things would now surely improve. However, nobody seems to believe in the explanations being offered – not even those who loudly call themselves liberal right. Of course, the other brand of liberals, left, centre-left or centre-centre, whatever you may call them, are expectedly critical.
Ironically, as far as GDP figures are concerned, the critical remarks are strikingly similar – both from the right and the left. One of them from the left of the centre, for instance, doubting that it is not even 4.5% rate of growth, says that there is something amiss, as the manufacturing growth is -1% industry growth is -0.46%, and agricultural growth is 2%.
“Remember that the government has manipulated data, real growth might be around 1-2% only”, is a left-liberal comment. Citing manipulation which the Modi government previously resorted to by revising the base year for calculating GDP to 2011-12, another commentator said, “As per the old series the actual GDP growth is 0.7%.”
Then there is Sadanand Dhume, a US-based right liberal, remarks, with an obvious reference to Arvind Subramanian, says, “If sceptics about India's GDP data are right, the actual growth rate may be even lower – 2.0% to 2.5%.
Another right-liberal Minhaz Merchant, doesn’t seem to dispute the figure, even says that the “average GDP growth over last 6 quarters is 6.2%”, adds, however, that things have turned “bad” and may be “growing worse” unless there are “reforms on GST, personal tax, land, labour and agriculture.
Amidst these comments, news has come that the Government of India is considering to revise the base year to calculate GDP growth rate – the Advisory Committee on National Accounts Statistics has recommended 2020-21 as next base year for GDP calculation, while earlier a seemed that the base year would be revised to 2017-18.
Meanwhile, critics have begun saying, just as previously the base year to calculate GDP was revised to 2011-12 by the Modi government in order to showcase a higher growth rate, the same would happen now. I am tempted to quote here from the heading of an article by Prof Kaushik Basu, a prominent economist at Cornell, US, in the New York Times (November 6), who says India has entered the quagmire of “mistrust economy" (more on this in my next blog).
A good explanation, I thought, but wondered, why was it that he continued harping on the double rate of growth for so long, when it wasn’t the case. During those years, data wasn’t easily accessible. There was no internet, so comparisons too were not easy. Documents, especially the official ones, weren’t easy to get either. If not experts, at least reporters would rely heavily on whatever higher ups would dished out.
Thanks to a senior Gujarat government bureaucrat, who brought the figure of 5.1% state GDP growth rate to my notice, I could get the official report, which clearly mentioned the “slip”. There was reason to wonder: Was Modi trying to showcase a higher rate of growth only showcase Gujarat’s growth story at a time when he was under heavy criticism for “mishandling” the post-Godhra anti-minority communal flareup in 2002?
Two plus decades later, one is tempted to ask: Has Modi learned a lesson? It doesn’t seem so, lest even those who have been supporting his economic policies wouldn’t begin expressing doubts in what is happening with the economy. Indeed, his effort to put political considerations higher than economic ones appears to have added confusion around the country’s latest GDP figure for the second quarter of the current financial year, 4.5%, the lowest in the last six years.
While the deceleration is there for all to see, the government continues to claim that things would now surely improve. However, nobody seems to believe in the explanations being offered – not even those who loudly call themselves liberal right. Of course, the other brand of liberals, left, centre-left or centre-centre, whatever you may call them, are expectedly critical.
Ironically, as far as GDP figures are concerned, the critical remarks are strikingly similar – both from the right and the left. One of them from the left of the centre, for instance, doubting that it is not even 4.5% rate of growth, says that there is something amiss, as the manufacturing growth is -1% industry growth is -0.46%, and agricultural growth is 2%.
“Remember that the government has manipulated data, real growth might be around 1-2% only”, is a left-liberal comment. Citing manipulation which the Modi government previously resorted to by revising the base year for calculating GDP to 2011-12, another commentator said, “As per the old series the actual GDP growth is 0.7%.”
Nobody seems to believe in the explanations being offered – not even those who loudly call themselves liberal rightAgrees BJP Rajya Sabha MP, Subramanain Swamy, a confirmed rightist; he is being loudly proclaimed by left-liberals as a “Harvard economist” for saying, “Do you know what the real growth rate today is? They are saying that it is coming down to 4.8%. I’m saying it is 1.5%.” He adds, “Prime Minister Narendra Modi has surrounded himself with yes-men while the Indian economy heads for a tailspin followed by a collapse.”
Then there is Sadanand Dhume, a US-based right liberal, remarks, with an obvious reference to Arvind Subramanian, says, “If sceptics about India's GDP data are right, the actual growth rate may be even lower – 2.0% to 2.5%.
Another right-liberal Minhaz Merchant, doesn’t seem to dispute the figure, even says that the “average GDP growth over last 6 quarters is 6.2%”, adds, however, that things have turned “bad” and may be “growing worse” unless there are “reforms on GST, personal tax, land, labour and agriculture.
Amidst these comments, news has come that the Government of India is considering to revise the base year to calculate GDP growth rate – the Advisory Committee on National Accounts Statistics has recommended 2020-21 as next base year for GDP calculation, while earlier a seemed that the base year would be revised to 2017-18.
Meanwhile, critics have begun saying, just as previously the base year to calculate GDP was revised to 2011-12 by the Modi government in order to showcase a higher growth rate, the same would happen now. I am tempted to quote here from the heading of an article by Prof Kaushik Basu, a prominent economist at Cornell, US, in the New York Times (November 6), who says India has entered the quagmire of “mistrust economy" (more on this in my next blog).
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