By a strange coincidence, the depressing statistics of the growth of the Indian economy for the last quarter of the previous fiscal and for the whole of last financial year were released by the Ministry of Statistics and Programme Implementation (MOSPI) on the day the BJP and its government at the centre were celebrating the completion of its first year in office. The last few months have been depressing enough; these figures have only added to the gloom and doom. It must also be pointed out that the government does not have the comfort of hiding behind Covid-19 and the consequent lockdown for this debacle because that accounts for only seven of the 365 days of the year just reported. It is another matter that the celebrations have also been marred by an escalated border conflict with China and another unexpected border row with Nepal. The beginning of the second year of Modi-2 could not have been more inauspicious.
Returning to the economy, let us look at the latest figures and what they tell us. First, the growth rate for the last quarter of the last financial year 2019-2020 has declined to 3.1% of the GDP.
Second, the whole year’s growth has fallen to 4.2% of the GDP, an eleven-year low. In July 2019, when the Finance Minister presented the budget for the whole year, she expected GDP to grow at 8.5%. Even as late as the end of February, the government was optimistic and pegged GDP growth for the last fiscal at 5%. I have not seen any red faces in the government so far at this blatant miscalculation.
Third, the quarterly growth figures for the previous quarters have been revised sharply downwards, the first quarter from 5.6% to 5.2% (minus 40 basis points), the second quarter from 5.1% to 4.4% (minus 70 basis points) and the third quarter from 4.7% to 4.1% (minus 60 basis points). The upward revision from the first advance estimates to the second was done in less than two months and the second downward revision also in less than two months. These revisions are not as innocuous as they appear. The upward revision on February 28 enabled the government to sustain the claim that the economy would grow by 5%. The downward revision on May 29 has enabled it to claim that the fourth quarter’s growth is 3.1% while according to Soumya Kanti Ghosh, group Chief Economic Advisor of the state-run State Bank of India, the growth rate in the last quarter would have been only 1.2% if the earlier figures had not been revised downward so sharply. ‘Heads I win, tails you lose’ appears to be the philosophy of the government here as elsewhere. The reputation of the government has suffered serious damage in the past because it has been accused of (and rightly so) of manipulating statistics; this episode only does further damage.
Yet, even this figure of growth is contested. In January 2015, the government not only changed the base year for calculating GDP, it also changed the formula for such calculation. This raised the growth rate for fiscal 2014-15, estimated earlier at less than 5% to 6.4%. The Modi government has enjoyed this statistical bonanza ever since. In an article published in The Indian Express on September 27, 2017, I had estimated that the growth figures were over calculated by at least 200 basis points or by two percent. This was a hunch. Later, Arvind Subramaniam, the former Chief Economic Adviser of this government did research on this subject and came to the conclusion that it was over estimated by as much as 250 basis points or by 2.5% percent.
During its first three years, the Modi government was on a roll as a result of this change. It enjoyed a growth rate of 7.4% in 2014-15, 8% in 2015-16 and 8.3% in 2016-17. The next year, the growth rate declined to 7%, and to 6.1% in the year after that. Now it has collapsed to 4.2%. Shave off 2.5% from this and we are staring at less than 2% growth for last year. But this is not all. In our system, the figures for the MSME sector, 99% of which are micro units, come with a lag of five years or more. It is imagined, in the absence of those figures, that the MSME sector has also grown in tandem with the big industrial units who report their figures on a quarterly basis. This umbilical link was snapped by demonetisation. Economists like Arun Kumar and others have long argued that because the MSME sector was impacted more adversely by demonetisation than the bigger units, the industrial growth rate was much less than what the government figures showed. Actually, the impact of demonetisation and a botched up and hurried implementation of the Goods and Services Tax are being felt in the economy now and its consistent decline starting 2017-18 is not an accident or cyclical, it is the direct result of the mindless and reckless government policies, which continue to this day.
We must also look at the components of growth of the last fiscal. The agricultural sector recorded a growth of 5.9% in the last quarter of the last fiscal, taking the overall growth rate of that sector to 4% for the entire year. Manufacturing and construction growth is actually in the negative zone. These two sectors account for the highest employment. The deceleration here would show that employment opportunities have taken a big hit in the last fiscal. There are other adverse effects also on the economy.
India has some of the smartest economists in India and abroad, two of them are Nobel laureates. Is the government consulting them or even listening to them? They have offered free advice in the past and also on the present crisis facing the Indian economy. So far, such advice has fallen on deaf ears.
In Covid times, the government will naturally hide behind this shield. If April figures for core sector growth and GST collections are any indication, we are in for very difficult times. Does it bother the government? Perhaps not. Jyoti Kumari cycled 1,200 kms over seven days, carrying her ailing father to Bihar. She is being hailed as a cycling champion. The Prime Minister has proved that he is the re-cycling champion of India. He has limitless capacity to re-cycle previous governments’ schemes with new names. Self-reliance has been our motto from before independence. It was the bedrock of Mahatma Gandhi’s philosophy for a self-reliant India. Nehru took it further. Every government since independence has espoused this cause. Yet “Atma Nirbhar Bharat” is now being presented as a brand new concept as if the people of India had not heard of it before or were ignorant and unaware of it. This is the power of ‘Prachaar’ or publicity. The BJP has mastered that art under the present leadership. So, white will be black and black white going forward. Keep your seat belts fastened.
Yashwant Sinha, former BJP leader, was Minister of Finance (1998-2002) and Minister of External Affairs (2002-2004)
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