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GDP growth slumps to 5.8% But India is a Growing Economy! Can We Trust The Data?

India’s GDP grew at 5.8% in the January-March 2019 quarter, dragging down the full year growth to a five-year low of 6.8%. The unemployment rate in the country rose to a 45-year high of 6.1% in 2017-18, as per official data released on the first day of the second term of the Modi government.

The Indian government’s official data shows the economy expanding 7 to 8 percent a year, rivaling or exceeding China since he took office in 2014. But changes in India’s statistical processes, particularly tracking whether jobs were created or lost under Mr. Modi, have prompted allegations of political interference and questions about data quality.

Labor Ministry surveys from 2011 through 2016 had the jobless rate below 3 percent.

The big question is: Whose data do you trust?

Some economists, particularly in academia, are deeply suspicious of the government’s statistics. “They have politicized this whole data collection process,” said Jayati Ghosh, an economist at Jawaharlal Nehru University in New Delhi. “Nobody believes the numbers anymore.”

Most of the time, that is a fair assumption, said Pronab Sen, a longtime civil servant who oversaw India’s economic statistics and the introduction of the new system before retiring in 2016. But small businesses were less able to cope with some big structural changes of the Modi years, he said.

Slowdown in the fourth quarter GDP was due to temporary factors, like stress in the NBFC sector affecting consumption finance. The first quarter of the current fiscal will also see relatively slower growth. From the second quarter onwards, we expect the growth and consumption to pick up

“Corporate India is doing very well,” Mr. Sen said in an interview at his home in southwestern New Delhi. “Noncorporate India, which accounts for about 45 percent of the economy, is not.”

Seven months later, in summer 2017, a single value-added tax was introduced, partly to better monitor taxable revenue. The new tax replaced a labyrinth of 17 state and national taxes, and considerably curtailed widespread bribery between businesses and tax collectors. Big businesses could afford to hire specialists to cope with the change and the government’s buggy software. Small businesses struggled, and are still struggling, to adjust.

Government economic statistics have not measured the divergence between how small and large businesses were affected by the reforms. The Modi campaign ran partly on its efforts to free businesses from red tape, but it provided no data from the past two years on joblessness, a key indicator of the informal sector’s health.

Disputes over India’s data prompted rancor, including complaints from 108 economists and social scientists who signed a letter in March that contended the Modi government was silencing bad news. “In fact, any statistics that cast an iota of doubt on the achievement of the government seem to get revised or suppressed on the basis of some questionable ideology,” the letter said.

Mr. Modi’s economic policy commission has insisted that the unemployment survey data — which remains unpublished — needs further review. Amitabh Kant, the commission’s chief executive and one of Mr. Modi’s top appointees, said in an interview that “India is creating a lot of jobs, but India is not creating quality jobs.”

Reference: NYT, Hindu


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