AUGUST 27, 2018

By Naresh Minocha, Consulting Editor

UPA's Tainted GDP vs NDA's Clean GDP

Gross domestic product (GDP) is no longer expressed in black and white. GDP is now painted in different shades. It can be tainted too in Indian political narrative. And this was amply demonstrated last week by Modi Government.

It fired all cylinders to ridicule a news agency story dug from an official report that was lying unnoticed in public domain since 25th July 2018. The story quoted data from the report of Committee on Real Sector Statistics (CRSS) to show that GDP grew faster under UPA than under NDA.

The story also referred to UPA recording double digit growth in two years. This emerged after CRSS linked old GDP data series with new data series.

CRSS was one of the five committees constituted by National Statistical Commission (NSC) for statistical improvements. The fifth panel is yet to submit its report.

Apart from phoo-phooing the story, the Government also downgraded the official report from final one to the draft one. It did the same for three other NSC reports too. As an after-thought, the Government inserted an identical page in all reports, seeking public comments on the reports.

All the four reports were shifted from prominent display on home page of website of Ministry of Statistics and Programme Implementation (mospi.gov.in) to a spot that most visitors would miss (http://www.mospi.gov.in/nsc_draft_reports). This is ultimate proof of Government's half-hearted commitment towards transparency.

Apart from issuing two official releases/clarifications on 19th August, two foremost economic heavyweights in Modi Government went hammer and tongs against poor quality of growth under UPA.

Finance Minister Arun Jaitley picked half a dozen holes in the economic growth attained during UPA regime. In a blog titled 'Growth During the UPA - Its Quality and Circumstances', Mr Jaitley observed: "The policies of the UPA to promote growth led to macro instability thus producing a poor quality of growth".

NITI Aayog Vice Chairman Dr. Rajiv Kumar trashed UPA growth glitter through six tweets. He also published a separate clarification on niti.gov.in.

Dr. Kumar wrote: "Higher growth rate in 2009-2011 and in previous years was funded by untenable fiscal deficit and reckless expansion of commercial bank credit which was surely unsustainable. Consequently, it led to a dramatic economic collapse and growth floundered spectacularly in the last three years of UPA II".

He added: "Likewise, growth of highest ever growth rate during 1987-89 Rajiv Gandhi period was also debt funded and led to a disastrous collapse of growth in 1990-92".

What about fiscal, debt and other compromises made by the present Government?

Why Modi Government is averse to idea of setting up the Fiscal Council, which has been recommended by Finance Commission, N.K. Singh Committee and others?

Why not ask Comptroller and Auditor General (CAG) or NSC to issue every year a quality of growth index?

The unfolding drama over growth saga under UPA should thus turn torchlight on two issues: 1) ruling politicians' penchant to cherry-pick statistics to self-certify their excellence in governance & run down good work done by previous regimes. 2)The need for robust, independent system for timely data collection & dissemination that is bereft of political machinations.

Cherry-picking instances are aplenty. One relevant instance, however, requires recall. It happened in July 2018 when news reports appeared that India has moved up in global GDP ranking from seventh slot to sixth.

Modi Government and BJP burst into jubilation over reported relegation of France to seventh position in the ranking of economies. They did not reveal the fact that the size of economy for this ranking was computed by the World Bank (WB) on the basis of Atlas method.

They did not mention the fact that there has been no change in India's rank as the third largest economy computed on purchasing power parities (PPPs). Third rank was achieved when UPA was in power. Status quo thus obviously does not call for chest-thumping.

What if Rahul Gandhi uses this statistics to his advantage? What if Mr Gandhi says vikas has merely done stationary jogging under NDA Government?

Whichever the computation method, the absolute size of economy is wrong way of international comparison. The right way to compare economies is with yardstick of GDP per capita.

India's GDP per capita rank on PPP basis was 126 th in 2017. India's GDP grew 5.4% per capita in 2017. This compares very poorly with the highest rate of 25.1% attained by Libya. Several countries recorded higher GDP growth per capita in 2017.

The World Bank clubs India with 46 other countries labeled as lower-middle income countries in its 4-category classification of countries on the basis of gross national income (GNI) per capita. The three other categories are: high income, upper-middle income and low income economies.

Growth is multi-dimensional. The Government should thus present all dimensions of data to the public in a manner that they understand.

GDP per capita is thus one of the several indicators of inclusive growth listed by Organisation for Economic Co-operation and Development (OECD) in its recent report captioned 'Opportunities for All - A framework for Policy Action on Inclusive Growth'.

The Report says: "The OECD is at the forefront of developing a 'people-centred growth model' in which well-being is the yardstick of success, not GDP per capita".

Some of the inclusive growth indicators listed in the Report are: median income growth and level, relative poverty rate, employment-to-population ratio, involuntary part-time employment, annual labour productivity growth and level, bottom 40 % wealth share and top 10% wealth share, life expectancy, female wage gap, correlation of earnings outcome across generations, childcare enrolment rate, confidence in government, share of small medium enterprises loans in total business loans and digital access.

With this perspective in view, it is worth noting that Government either does not collect statistics on many unpleasant issues or collects them at a frequency of once in 10 or five years.

This brings us to the need for empowering and transforming NSC into a statutory body, a job that UPA Government resolved to do it in 2005. This forgotten resolve has been resurrected in draft National Policy on Official Statistics (NPOS). It was unveiled during May 2018.

There is no reason why NPOS should be delayed further. It only requires approval of the Cabinet. NPOS owes its origin to the Cabinet decision during May 2016 to adopt United Nations Fundamental Principles of Official Statistics.

Announcing the Cabinet decision, an official release had stated that the adoption would "bring professional independence, impartiality, accountability and transparency in methods of collection, compilation and dissemination of official statistics, besides adopting international standards".

The release added: "The adoption will also pave way for devising a National Policy on Official Statistics for improving systems, procedures and institutions consistent with these principles".

While clearing final NPOS, the Government should specify timelines for implementation of different provisions of the policy. This includes an amendment to the Constitution to bring clarity and improvement in collection of core data. Such data has been grouped into eight domains. These are 1) national income, 2) production & services sectors; 3) budgetary transactions, 4) money and banking, 5) capital market, 6) indices and other short term indicators, 7) external Sector, and 8) demography, social and environment Sectors.

The Policy has mooted statistical audit of the core statistical activities to ensure quality and integrity of the statistical products. It also specifies a Code of Statistical Practice. It would be enforced by all the entities engaged in generation of core statistics.

Missing from the 68-page draft policy is a mention about annual Employment-Unemployment Survey (EUS). It is conducted by Labour Bureau. So is quarterly Periodic Labour Force Survey (PLFS). It would be conducted by National Sample Survey Organization (NSSO). It has already undertaken maiden PLFS. It's findings are yet to be made public. These would shed new light on unemployment, employment and quality of life.

The draft policy is also silent on another core statistical product, annual time use survey, which is yet an indirect but important indicator of employment and underemployment.

The Government had taken a policy decision to conduct this survey in 2018. No update on this is available in public domain. This survey must have specific questions on the time citizens spend in standing in different queues. It would help the Government improve of ease of living for hapless citizens.

NPOS should thus put statistical products relating to employment and underemployment at the very core of its core statistics. After all, labour is crucial factor of production in an over-populated country. Labour's acute under-utilization should signal appropriate policy interventions in automation, labour-intensive industries, export of manpower and services and skill development.

More urgent is the need for the Government to allocate adequate funds for expansion of statistical organizations and for financing data collection and analysis in diverse spheres at requisite intervals.