Don’t Obsess About Numbers

It’s time policymakers outlined a coherent growth path for the economy.

Written by Yoginder K. Alagh | Updated: June 22, 2017 12:08 am
Indian economy, cso, gdp, manufacturing sector, farming sector, IIP It was announced that in April 2017, manufacturing grew only by 2.6 per cent as compared to 5.5 per cent in April 2016.

Come on CSO (Central Statistics Office), you are spoiling the three-year party! We were waiting for March to end so that we could get cracking at the three-year back-patting and claiming that the policymakers were implementing “my policies’’. But fortunately, you have given us the path of growth. The economy was growing at seven per cent. The agriculture story was so so, but you can’t blame policy for the weather. Manufacturing was growing at seven per cent. Of course, the Index of Industrial Production (IIP) grew by 2.7 per cent, so there was a story there. But by the time we pen to paper, the CSO changed the world. Now in March, the IIP grew by 3.7 per cent. So all is well.

In industry, we are grateful for small mercies. The days when industry was to grow by over seven per cent, a global standard of good industrial performance for a developing economy, were gone. So now has the “normal’’ for industry changed? But by the time the ink was dry, it was announced that in April 2017, manufacturing grew only by 2.6 per cent as compared to 5.5 per cent in April 2016. Maybe the IIP, which measures physical output and not value added, will do better. But no. Industrial output as measured by the IIP grew only by 3.1 per cent compared to 6.5 per cent in April 2016.

This raises many questions. The revised series of GDP and IIP were showing a higher performance for earlier years, which would have meant that we were earlier working with outmoded data, excluding new industries, lamenting slow growth of outmoded products and ignoring the dynamics of growth. Now in March and April, the new series is showing the same old slow pattern of growth. Is this also data induced? Probably not, even though it needs to be accepted that systems of numbers take time to gell. Why I don’t know, but they do. The CSO, to be fair, had given a longish methodology note.

Are we then seeing a new low “normal”? What it would imply is the technological opportunity created by the tremendous innovations taking place in India and the world gave us new opportunities and high manufacturing growth, but that potential is tapering off. I don’t believe this. We need some data and judgement-based alternate thinking and policy insights rather than be in a denial mode.

The investment context is very depressing: From almost a third of the GDP, it is getting close to a quarter of the GDP. It is here that China keeps on proving the pundits wrong: Its infrastructure investments back a solid industrial revival despite the negative talk. Perhaps, China has a surplus of infrastructure. But as a recent piece in The New York Times notes, this can be absorbed by fast industrial growth. The NYT article also notes that India is a contrast and its models of Public Private Partnerships have not worked. They get into conflicts with regulators, ask for revision of terms which are not feasible on account of legal barriers and then lead to withdrawal symptoms. Chinese investments are largely public sector led. Public investments in India have gone down from 32 per cent of the GDP to less than 28 per cent and are spiraling down. The reliance on the Goods and Services Tax is a little exaggerated for its short-run effects are not going to be large. The NITI Aayog has also in its Three Year Vision document given the calculations in terms of the revival of investment and the leading role of public investment. The importance of the present at the expense of the future came out starkly when Finance Minister Arun Jaitley rubbished the Aayog’s proposal to raise resources from agriculture for investment.

The economy clearly has a reservoir of possibilities. Instead of just stating a vision, it is high time that policymakers gave us the policy outline of the path going up. Otherwise we will, like Oliver Twist, be left asking for more.

The writer, an economist, is a former Union minister

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  1. V
    v b
    Jun 22, 2017 at 12:11 pm
    More than GDP which may reflect growth in income of those who are already billionaires, the Government should be more obsessed with how much unemployment has been reduced as that may indicate those with no income at all and hence smack of a social besides economic malaise. Economic development can be ensured by stimulating/ the following essential ingredients RESTFORD standing for Resources including Human Resources, Entrepreneurship including that in both Public Sector and Private Sectors,Supportive Government policies,proisiion of infrastructure, Technology including discovery (e.g., new oil wells), Finance (including divestment of loss-making enterprises, Optimistic outlook and spirit, Restraining organizations and Department from action-steps that counter or depress employment, Demand (which is created, in part at least, by Supply itself, higher incomes.
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  2. J
    Jemma Thomas
    Jun 22, 2017 at 8:56 am
    First and foremost, we need to understand that economy reflects the demography. You can't compare China to India as the polico- economic system is diagonally opposite. One is controlled and centralised economy and ours is market based. Our data base is reasonably reliable and reflective of what you see, what you get. China is flashy mask on a dracula face. Let us set aside that part. Our demography is bit of an easy going laid back compare to east asia's aspirational at ude. We have twin engine, one wants to be aspirational while the other one wants everything given for doing nothing. Just a decade ago, our harvard educated FM said, India skipped Industrial revolution and jumped straight in to service economy. Now we see the effect of such dumb ministers policy framework coming and biting our ass. 70 years these so called socialistic govt's and its thugs ate away all our kids and their kids food as well. Today you expect everything to be fixed with one policy statement. good luck
    Reply