Has Modi government fudged GDP data to airbrush impact of demonetisation?
Economists and data journalists have been left in a puzzled state as the new GDP figures have been rolled out by the Central Statistical Organisation (CSO) under the auspices of the Narendra Modi government.
In an unexpected turn of events, the latest – official – figures show Indian GDP growing at a healthy 7.1 per cent in fiscal year 2016 overall and growth during October-December 2016, or Q3 of the fiscal year, reduced to only 7 per cent, just 0.4 per cent from the earlier 7.4 per cent estimate before demonetisation kicked into effect on November 8, 2016.
As Reuters has reported, this rosier picture of GDP growth rate is hardly commensurate with the expectations from top economists and data crunchers worldwide, with a number of reports, well into the last few days of February 2017, making ominous prognosis of economic dip.
For example, this report cites a poll taking into account views of 30 economists in the middle of February 2017, and it said the Q3 GDP growth rate is likely to dip to 6.4 per cent, because of demonetisation. Narendra Modi’s decision to ban the old Rs 500 and Rs 1000 currency notes sucked out 86 per cent of hard cash from the Indian economy, leaving the rural and informal sectors reeling in a terrible mess.
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| The rosy GDP figures come in the wake of massive criticism that the Modi government has received for its thoughtless move. |
According to the latest figures, however, we don’t have to worry because we have even overshot China, which grew at 6.8 in October-December last year, and this despite demonetisation.
Only yesterday, we saw the pan-India bank employees strike to protest the failing PSU banks that the Indian government has turned into a private coffer to loan/bail out defaulting corporates. The escalating bad loan problem, a massive 56 per cent of all PSU loans at present, shot up by 135 per cent in the last two years.
The rosy GDP figures come in the wake of massive criticism that the Modi government has received for its thoughtless move, and various foreign publications leaving no stone unturned to castigate India over this sudden decision.
The new data from CSO, euphemistically titled the “second advanced estimate”, is in fact the same as the “first advanced estimate” released in January 2017, but it had mentioned that demonetisation’s impact was not factored in. Since the revised estimate is same as the first, the only inference to draw here is that demonetisation has had no palpable impact on the GDP figures and on economic growth.
Is Modi Govt fudging the GDP numbers? Is their data as fake as their nationalism? https://t.co/kT9JxCQX71
— Raghav Chadha (@raghav_chadha) February 28, 2017
This is fraudulence in plain sight because data, and staggering amount of data, has shown how the informal sector, the agricultural sector, production and retail have been hit by the cash crunch.
As this report says, India’s annual infrastructure output growth slowed to 3.4 per cent in January from 5.6 per cent in December, and this is because of a “fall in refinery production and deeper contraction in cement output”, according to, well, government data.
With official GDP figures unchanged at 7 % even after notenandi, govt has truly inaugurated post truth economics! Dont know what to believe.
— M K Venu (@mkvenu1) March 1, 2017
The robust GDP figures have left economists and experts miffed since this is contrary to even the most optimistic predictions. With job losses peaking and companies laying off employees at a staggering rate, the numbers simply don’t add up.
#ModiFudgedGDP World economists r dazed at the robust figures of Tuesday released GDP.Doubting the juggling of figures,let's dispel the myth
— Dr.Yasodhara P (@dr_yasodhara) March 1, 2017
However, the economics affairs secretary, as well as the Union ministry of finance would like us to believe otherwise. According to them, the naysayers have been proved wrong since it’s almost as if demonetisation didn’t happen.
The answer to this, however, can be found in the explanation offered by Esther Duflo – MIT economist – who says that because demonetisation hit the unorganised sector and the poor, its impact on GDP might not be the accurate indicator of its effect.
On the other hand, this analysis “explains” the new GDP rate, which it ascribes to fiscal stimulus and the timing.
So, whom to believe for data now? And also, whom to run to for methodology and number-crunching when those by the government too are increasingly suspect?