This article, I hope, will convey the extreme irritation that many educated Indians are experiencing with erudite but eventually pointless debates over the Indian economy. And there is a very good reason for their annoyance.
The Americans, who are good at inventing highly expressive and very pithy sayings, have one that describes a confused person: he didn’t know whether he was coming or going. Or if you like, she.
Likewise, today we don’t know for sure whether the Indian economy is doing well or badly. It’s like one doctor telling you all is well, another telling you that death is imminent and a third saying try meditation.
The Modi government has itself to blame for this annoying state of affairs. It has been as parsimonious with data as it has been generous with its social, political and religious agenda.
The palpable absence of reliable data has been documented widely. It doesn’t bear repetition. Suffice it to say that it nearly doesn’t exist.
Population, unemployment, consumption, industrial production, agricultural output, you name it. Even the most ardent fans of the government will not bet on its reliability.
The biggest joke, of course, is data on which inflation is calculated. Even the CSO can’t agree on how it should be done.
India is a huge country. How do you get a single rate for Maharashtra and Arunachal Pradesh? Or Tamil Nadu and Kashmir?
What bears repetition, however, is that now its different organs are saying different things. Result: confusion as for example over the household savings rate.
Take the simple Keynesian identity that so perfectly describes an economy: GDP = C + I + G (X-M), where C Is consumption, I Is private investment, G Is government expenditure, X is exports and M is imports.
Of these five, only G is fully known. X and M are half-known because of persistent over- and under-invoicing of exports and imports on the one hand, and the discrepancy between Commerce Ministry data and RBI data on the other.
But as to the two crucially important variables, consumption and private investment, even Justin Trudeau can say what he likes about them. It’s what’s called shoot-and-scoot. Make a claim without proper supporting evidence.
Hence the confusion about the growth rate of GDP. It lies in the eyes of the beholder. Indeed, so varied, ill-informed and self-serving are the estimates that we don’t really know at what rate the economy is growing, if at all.
Personally, I think it is growing much faster than everyone says it is. I have been saying this now for 30 years that, if the Chinese overestimate their growth by double and even triple counting, we underestimate it by not counting at all. Our large informal sector ensures that.
So it is that old Hindu philosophical saying Neti, neti. Wikipedia tells us what it means.
“Not this, not that”, or “neither this, nor that”. The concept is found in the Upanishads and the Avadhuta Gita and constitutes an analytical meditation helping a person to understand the nature of the Brahman by negating everything that is not Brahman.”
India’s economists, in true priestly tradition, are masterful practitioners of this art. And because the data is so outdated, they are able to say “Yo! My proof is better than yours”.
Or, in terms of logic, they rely on axiomatic reasoning where there is always one axiom that can neither be proved nor disproved. That’s Kurt Godel’s theorem.
Lawyers put it differently. They say it’s your word against mine. Judges say no evidence, no admitting the case.
This horrible impasse means that the time has come for at least those economists who study the Indian economy for fame and fortune to stop quarrelling with each other and sign regular petitions to the government to improve the data.
A task for the PM
But petitions by economists will not be sufficient. I have said this before and will say it repeatedly: the Prime Minister has to pay personal attention. He alone can bring about the improvements in the statistical system.
He has managed to change many things in the two terms he has been Prime Minister. If, as is likely, he will be Prime Minister for another term, he must, absolutely must, drive the process of improving the statistical system, not least because he understands its criticality.
In fact, his government has been under constant attack by interested parties and economists who have a preference for the Congress. They can’t be blamed, however.
His government has left the goal undefended. It just hasn’t put out the data, wrong or right, complete or incomplete.