The Hindu Business Line : Discerning the data

EVEN as economists such as Mr Lester Thurow of the US express doubts about the veracity of the data regarding the growth of the economies of Japan and China, the basis on which the related figures are arrived at itself is questioned in some other quarters.

Let us take inflation. Are the published figures manipulated or `massaged' to suit the prevailing milieu? One is not sure. There may not be George Orwell's `doublespeak', but there are twists and varying explanations to suit the wishes of the powers that beEven the figures of the GNP (Gross National Product), an index happily free from controversies, are often altered and amended so that the final result is lower than what was forecast earlier. By contrast, it is believed that China often projects GDP figures far beyond what is possible of capable of actual realisation.

In view of this, some analysts, like Peter Drucker, refute the popular notion that China is far ahead of India in economic growth.

Perhaps the exercise of GDP calculation itself bristles with problems. It is even trickier in developing countries where agriculture is a major desideratum of GDP as agricultural production is heavily dependant on erratic monsoons, and forecasts are uncertain. Thus, the spectacle of leading research institutes putting out different estimates of GDP growth over the same period. The 1997-98 GDP growth in India, for instance, was estimated at 5.1 per cent by NCAER (National Council of Applied Economic Research), while ICRA ) said put the figure at 5.5-6 per cent. The CSO (Central Statistical Organisation) placed the figure at 5.0 per cent.

Worse, apart from the variations in overall growth, the estimates for individual sectors in the economy also vary, and there is a justification for every point of view! So much so, leading journals and commentators grimly stated that if credibility is not to be lost, these institutions have "to quickly improve their data collection and estimation procedures." Then what about the lack of uniform procedures adopted? If the first (base) year of a period of calculation happens to be of a regime with rigid controls, restrictions in imports, etc., and the final (terminal) year happens to be of a liberalised era, comparison between the figures of these two years loses much of its validity.

Again, unless extreme care is taken, the value of transactions in monetary terms can give a distorted picture to the observer. When the value of a currency (rise or fall) vis-à-vis another one frequently fluctuates, one has to be careful in sticking to consistent norms in calculations. Otherwise, when comparisons are made, the monetary value of the transactions would appear to be higher in terms of the devalued currency than in terms of the currency that has appreciated.

More distressing is the fact that the utility of GDP as a useful tool itself begins to be questioned. While the related statistics are so versatile as to be virtually meaningless and documental deficiencies make even arithmetical aggregation of the required data complicated, the concept itself is not free from a multiplicity of failings, according to some critics. Foremost, in the entire exercise of computation, no distinction is made between productive and destructive activities. Major wars mean enormous economic activity but what of the attendant damage and destruction?

Next, the value of the existing natural resources is not taken into account, until they enter the monetary economy. The irony is, only when they are destroyed through consumption, they are being accounted. Again, in most of the Asian countries, millions of people keep doing scores of odd jobs, much of which is productive and useful. But being in non-monetised sectors, these do not appear in the picture of GDP at all. Crowning all this is the irreparable damage to the environment, which would prove extremely harmful to planet earth itself!

(The author is a Bangalore-based freelance writer.)