Cloud over economic data invites questions about government’s sincerityhttps://indianexpress.com/article/opinion/columns/india-new-gdp-data-central-statistical-office-gdp-series-modi-govt-5595446/

Cloud over economic data invites questions about government’s sincerity

There seems to be a systematic pattern in distorting and/or withholding public information that could throw a harsh light on the government’s performance. This is the time for all democratically-minded people to raise their voice against the tendency.

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India was a pioneer in nurturing such a statistical system. As Angus Deaton, the Noble laureate, and Valerie Kozel said, “Where Mahalanobis and India led, the rest of the world followed”.

Economic statistics have a public good character — their use is non-rival and non-excludable. Such information is necessary for evidence-based policymaking and informed discussion in democracies where citizens seek accountability from their government. The use of scientific methods for collection and estimation and their timely dissemination are, therefore, public services. Universally, publicly-funded institutions with professional independence and external oversight perform these functions to insulate them from political interference. India was a pioneer in nurturing such a statistical system. As Angus Deaton, the Noble laureate, and Valerie Kozel said, “Where Mahalanobis and India led, the rest of the world followed”.

Lately, Indian statistics have come under a cloud. In early 2015, the Central Statistical Office (CSO) issued a new GDP series (with the revised base year 2011-12), which showed a significantly faster growth rate for 2011-12 to 2013-14 compared the earlier series (with base-year 2004-05). Manufacturing sector growth rate for 2013-14, for instance, simply ballooned — swinging from (-) 1.4 per cent in the old series to (+) 5.5 per cent in the revised one. Data users sought the CSO’s explanation as the revised estimates did not square with related macro-aggregated data such as bank credit growth or industrial capacity utilisation. Dismissing such criticisms, the CSO asserted that the revision was in line with the global best practices — following the UN System of National Accounts, 2008 — and used the Ministry of Corporate Affairs’s (MCA) much larger corporate database.

Since then, with almost every GDP revision, more worms tumbled out of the can. For instance, in the January 31 release, the GDP growth rate for 2016-17 — the year of demonetisation — was revised upwards by 1.1 percentage points to 8.2 per cent, the highest in a decade. This flies in the face of most evidence economists — most recently, Gita Gopinath, the IMF chief economist — have produced. How could such large counter-intuitive upward revisions happen? It is impossible to independently investigate the mystery, as the CSO has refused to reveal specific methodological details.

As mandated since 1950-51, with every base-year revision, the CSO has always published the back series within a few months of the publication of the new series. This time it took over three years, as the officials informally admitted their inability as MCA data for years prior to 2006 did not exist. Yet, last year, two competing back series of varying time lengths were prepared — separately by the National Statistical Commission and CSO— showing diametrically opposite growth rates. They seem coloured by political considerations, discrediting not only professional work but also damaging institutional integrity. The seeds of doubts about the GDP revision sown four years ago have grown into a banyan tree of distrust.

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In another instance recently, the Department of Industrial Policy and Planning (DIPP) has stopped updating FDI inflow data. Its official web page was last updated a year ago, with figures available up to December 2017. Surprisingly, the government that has often invoked rising FDI inflow as evidence of its industrial policy success has turned silent. Why, one wonders.

Make in India’s success is claimed by showing the improved ranking in the World Bank’s Ease of Doing Business (EDB) index — from 142 in 2014 to 78 in 2018. But as the improved ranking is shown to be an artifact of changed methodology, did it really accomplish a policy goal without an improved industrial performance?

Russia offers a telling example of the futility of improved EDB ranking, which went up from 120 in 2012 to 20 in six years, without any effect on foreign capital inflows. Who will fall for such gimmicks, least of all foreign investors?

Since 1995, the National Crime Record Bureau (NCRB), Ministry of Home Affairs, has published data on suicides, which is used to flag the gravity of farmers’ suicides. In 2016, the MHA ceased to publish this information, fueling speculation about the government’s motives, when agrarian unrest is believed to be rising, and has become a political issue.

Most recently, skipping of the scheduled release of the results of the Periodic Labour Force Survey (PLFS) in December 2018 has raised more questions about the government’s intentions. The survey results are a report of the government’s economic policies, as it was the first economy-wide employment survey held after 2011-12. The leaked data confirmed the worst fears of an unprecedented rise in unemployment rates, confirming the government’s motivations in the suppression of the data.

Contesting the leaked PLFS estimates, the NITI Aayog CEO asserted an employment boom, invoking the rising EPFO membership — a database widely known to account for just about 15-16 per cent of the formal sector workforce. In fact, the chief statistician, in his maiden interview after assuming the office, categorically stated that EPFO data does represent the employment situation of the country. The CEO also claims 22 million jobs were created in 2014-16, citing a McKinsey report. The report, however, does not provide any statistically and economically valid explanation for its estimates.

There seems to be a systematic pattern in distorting and/or withholding public information that could throw a harsh light on the government’s performance. It is increasingly relying on anecdotes fed by private and international consultants for policy making, discarding nationally representative, professionally estimated data, vetted by independent experts.

This is the time for all democratically-minded people — regardless of their political and ideological leanings — to raise their voice against the tendency, and impress upon the government to restore access and integrity to public statistics, and re-establish institutional independence of the statistical organisations.

This article first appeared in the print edition on February 22, 2019, under the title ‘When figures are suspect’. The writer is professor, Indira Gandhi Institute of Development Research, Mumbai.