Modi should clear air on GDP growth
All leaders - whether it is Prime Minister or the Chief Minister or even the leaders in Opposition - chant...
All leaders - whether it is Prime Minister or the Chief Minister or even the leaders in Opposition - chant the mantra of transparency and accountability in governance. Everyone vows to usher in a government that would become a role model for the country if not the world.
Those who come to power accuse the previous government of not being transparent and of having indulged in corruption of the highest order. But is transparency being really maintained in governance? This question arises from the research paper brought out by Narendra Modi's former Chief Economic Adviser Arvind Subramaniam who has deduced that the economic growth rate in the country has been overestimated by 2.5 percentage points.
"Official estimates place annual average GDP growth between 2011-12 and 2016-17 at about 7 per cent. We estimate that actual growth may have been about 4.5 per cent with a 95 per cent confidence interval of 3.5 - 5.5 per cent. India changed its data sources and methodology for estimating real gross domestic product (GDP) for the period since 2011-12. This paper shows that this change has led to a significant overestimation of growth," he said in the paper.
He said the implication of this is: "Macro-economic policy too tight. Impetus for reform possibly dented. Going forward, restoring growth must be highest priority, including to finance government's laudable inclusion agenda. GDP estimation must be revisited."
two important policy implications follow: "The entire national income accounts estimation should be revisited, harnessing new opportunities created by the goods and services tax to significantly improve it; and restoring growth should be the urgent priority for the new government."
These revelations bring to the fore the need to restore the credibility of data and the only solution is to undertake a statistical audit of the GDP revision process and set up an independent commission of global experts to thoroughly review all aspects of national accounts. There could be many people particularly among the politicians who may say that why did not the advisor raise the issue when he was holding the key post.
Well, the time when officials or experts who become advisors speaking out when in office has become a thing of past. Subramaniam, however, said he did speak out internally when his team tried to tighten the loose ends and he could carry out research only after moving out of the office. Fair enough.
But majority of the officers over last few decades have stopped being the real eyes and ears of the government and instead they seem to be following the BBC sitcom 'Yes Prime Minister' written by Antony Jay and Jonathan Lynn that was aired on BBC in 1986 or so. This comedy show is very much still relevant in Indian context.
Coming back to the issue, the Modi government which has come back to power with absolute majority should not hesitate to call a spade a spade and go in for a review so that the doubts about GDP growth rate are cleared. More importantly, the credibility of Indian data is at stake.
If the air is not cleared soon, then it won't be long before India is counted among the countries that dress up data to make their economies look good. Hence, the Modi 2.0 should immediately take up the exercise and clear the air.
The government should not brush aside the issue just because Subramaniam has stated that the problems related to periods ruled by both the National Democratic Alliance and the United Progressive Alliance. Hence the Modi government should go in for data audit, clear the doubts and prove that they are different from the previous rulers in letter and spirit.